IRB Infra Developers advances 4% post Q1 results; here's what analysts say

Credible track record of over two decades helped us raise sufficient liquidity even during these difficult times, says Virendra D Mhaiskar, Chairman and Managing Director of IRB Infra

Shares of IRB Infrastructure Developer advanced up to 4.2 per cent to quote at Rs 130 on the BSE on Tuesday after brokerages maintained their 'Buy' call on the stock post its June quarter result announcement. At 1:35 pm, the stock was up around a per cent at Rs 126 per share, as against 0.21 per cent rise in the benchmark S&P BSE Sensex.

The highway developer on Monday reported a consolidated net loss of Rs 30.13 crore for the quarter ended June, as against a consolidated profit of Rs 206.62 crore in the corresponding quarter of previous fiscal. Moreover, its profit before tax (PBT) tanked 99.2 per cent YoY to Rs 2.95 crore during the quarter under review as against Rs 387.17 crore in the year-ago period.

While its total consolidated income during the quarter under review declined to Rs 1,073.46 crore, from Rs 1,821.12 crore in the year-ago period, its total expenditure declined to Rs 994.66 crore compared to Rs 1,433.95 crore in the year-ago period.

"Credible track record of over two decades helped us raise sufficient liquidity even during these difficult times... This helped in continuation of smooth execution of projects and also in achieving financial closure for the largest TOT (toll, operate and transfer) in the country in stipulated time. As NHAI awarding activity is picking up pace, we also succeeded in winning one HAM project in Gujarat worth Rs 1,755 crore," said Virendra D Mhaiskar, Chairman and Managing Director of IRB Infra.

Here's how the brokerages interpret the results:

HDFC Securities

Target price: Rs 142 | Reco: Buy

Revenue of Rs 1,020 crore for Q1FY21 was 15 per cent ahead of our estimates. EBITDA of Rs 480 crore beat our estimate by 55 per cent. However, IRB reported loss of Rs 30.13 crore, marginally behind our estimate on account of higher than expected finance cost, taxes and losses of JVs/associates. Basis management commentary, APAT would have been at around Rs 54 crore, if the company had recognized compensation income, as per the agreement signed with the clients.

Consolidated gross debt stood at Rs 14,350 crore. With cash balance of Rs 2,100 crore, net D/E stood at 1.75x. With completion of transaction with GIC, moratorium on loan repayment and interest payment, and fund raising of ~Rs 15bn at parent level, IRB has considerably shored up its liquidity. IRB will invest Rs 550 crore in the nine SPVs transferred to private InvIT.

Prabhudas Lilladher

Target price: Rs 152 | Reco: Buy

For Q1FY21 IRB reported good set of numbers with revenues beating our and street estimates along with stable EBITDA margin of 46.7 per cent. Post relaxation in lockdown, company saw sharp revival in toll collection across projects which stood at an average around 80 per cent YoY pre-Covid levels in July’20, with some projects already reaching at pre-covid levels. On the back

of extension of concession period by NHAI and RBI’s relief of loan moratorium, management expects NPV of cash flow from its BOT portfolio to remain largely unaffected because of Covid-19 pandemic.

IRB Infrastructure is one of the largest BOT toll operators in the country having market share of ~22% in the total Golden Quadrilateral projects with over 3,700km of total projects successfully executed. At CMP, the stock trades at a P/E of 9.5x/5.8x on FY21E/FY22E EPS and is trading at an EV of 4.5x/4.2x FY21E/FY22E EBITDA. We have marginally tweaked our FY21E/ FY22E earnings estimates by 0.3 peer cent/0.6 per cent. Revised target price (up from Rs 139) is mainly due to 50 per cent value assignment to IRB InvIT investment (lock-in period is over).

Kotak Institutional Equities

Target price: 150 | Reco: Buy

IRB’s revenues were ahead of our estimates on better-than-expected toll collection. Toll revenues have now reached 78 per cent of pre-Covid levels. EPC execution is gathering momentum and revenues were led by a ramp-up of construction on Agra-Etawah, Hapur-Moradabad and VK-1 HAM projects. EBITDA got a boost from higher other operating income.

IRB has raised NCDs worth Rs14.5 bn during 1QFY21 to meet near-term liquidity requirements and has cash worth Rs21 bn at the end of quarter. It is also expecting Rs31 bn from InVIT for deferred consideration towards sale of SPVs. Near-term large payments to MSRDC for Mumbai- Pune project have already been made. Equity requirements for existing projects stand at Rs550 crore which can be met via internal accruals. Along with this, we expect healthy cash profits from Mumbai-Pune and improving traffic at Ahmedabad-Vadodara project to take care of debt and NHAI premium obligations.

Antique Broking

Target price: Rs 175 | Reco: Buy

The daily toll collections grew back to over Rs 3.27 crore in June 2020, after steeply contracting in April 2020. The company expects a strong rebound in collections, once inter-district traffic movement restrictions are relaxed. Moreover, the commercial vehicles have reached around 50 per cent recovery levels, with increased traction and hopes pinned up on opening of economy.

In the immediate term, there are Rs 9,300 crore projects under pipeline. Here, IRB plans to win and shore up the construction order backlog to over Rs 7,000 crore. We expect the company to grow its revenue by 2 per cent CAGR between FY20-FY22E. With lower EPC revenue and higher numbers from Mumbai-Pune TOT, we expect EBITDA margin to inch-up from the reported levels. We forecast 13 per cent CAGR in EBITDA till FY22E. The current valuation has discounted the near-term stress in RoE. Using some of the parts, with a TP of Rs 175, we maintain BUY.