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IVRCL Infrastructure 1QFY2013 performance highlights and results update

Contributed by Angel Broking

IVRCL Infrastructure (IVRCL) reported disappointing numbers for 1QFY2013, with lower-than-expected performance. The order inflow for 1QFY2013 was at ~Rs.3,900cr, out of which Rs.2,800cr was contributed by road build operate transfer (BOT) projects and the balance by engineering, procurement and construction (EPC) contracts. The company’s order book stands at ~Rs.27,100cr (4.9x FY2013E revenue, including L1 projects of Rs.2,000cr). IVRCL has merged IVRCAH with itself during the quarter. The company has sold its stake in one of its road BOT projects and has recognized an amount of Rs.117cr. Further, IVRCL is in an advanced stage of negotiation for sale of another two to three road BOT projects. As per the management, these asset sales are intended towards meeting the equity requirement for the road BOT projects and reducing debt levels.

Poor show on the numbers front: For 1QFY2013, IVRCL’s revenue grew by 7.4% yoy to Rs.1,207cr and was marginally below our estimate of Rs.1,258cr. On the operating margins front, the company posted margins of 10.3%, an improvement of 270bps on a y-o-y basis, ie above our estimates of 7.7%. The interest cost came at Rs.138cr, a jump of 67.0% and 41.4% on a y-o-y and q-o-q basis respectively. On the earnings front, IVRCL reported a loss of Rs.6cr against a profit of Rs.4cr in 1QFY2012 and our estimate of Rs.3cr owing to higher interest cost.

Outlook and valuation: IVRCL has an equity requirement of Rs.2,700cr out of which Rs.700cr has already been invested. The remaining Rs.2,000cr would be partly funded by the company through internal accruals and sale of BOT assets/land parcels. This is expected to raise Rs.1,100cr while the remaining Rs.900cr would be funded by Compulsory Convertible Debentures. IVRCL has a strong order book of ~Rs.27,100cr (4.9x FY2013E revenue), which provides revenue visibility; however, the company would need to focus on its execution pace going ahead, which has not kept pace with order book growth. We maintain our Buy recommendation on the stock with a target price of Rs.51.