IVRCL INFRASTRUCTURE BOM:530773
Reco price: Rs 347.55
Current market price: Rs 367.4
Target price: Rs 446
Upside: 21.4%
Brokerage: Macquarie Research
IVRCL’s second quarter numbers were in line with expectations. IVRCL revenues grew by 11 per cent in H1 FY10, much lower than the full-year guidance of 30–35 per cent. However, the management stands by its guidance, given that H1′s revenue booking was hampered by slow execution of its projects in Andhra Pradesh due to elections.
Some of these projects will start contributing to revenues from Q3 onwards. IVRCL was L1 on few large projects in Maharashtra this quarter, which should contribute to revenues in H2 FY10. The company expects to grow its 2009-10 revenue by 30 per cent. The management had guided for 9.5–10.0 per cent margins for full year (2009-10), whereas the in-house estimates margins to be 9.7 per cent.
IVRCL’s order book stands at Rs 15,000 crore and it is looking to participate aggressively in the road sector. Moreover, the irrigation sector orders inflow is likely to pick up from provincial governments. IVRCL’s net debt/equity ratio at 0.7x, allows room to add leverage and as there are no investment requirements toward the current BOT/real estate projects, funding availability is not a concern for new projects. IVRCL is trading at 13.7x FY10E and 11.1x FY11E earnings adjusted for subsidiary valuations. Maintain outperform.
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