IRB Infrastructure Developers Ltd. share price target

The company has received approvals from NHAI, lenders and SEBI for the IRB-GIC deal and is expecting to receive the proceeds during this quarter. The proceeds from this deal should help IRB meet its equity infusion requirement of ~Rs 28bn in under implementation projects. IRB will also leverage this partnership to bid for upcoming BOT and TOT projects, though it will have to bring in 51% of equity under such agreements. Securing Mumbai Pune expressway TOT project will provide further fillip to the revenues from toll collections. We maintain BUY. Key risks (1) Sustainability of toll revenue collection rate in the BOT portfolio, (2) Market acceptability for BOT projects IRB delivered in-line revenue with EBITDA/APAT beat of 9%/17%. IRB-GIC deal is expected to conclude during 4QFY20 with all the approvals in place. We maintain BUY with an SOTP based TP of Rs 172/Sh.

The Mumbai-Pune project can change the fortunes of the company, given the annual toll collection potential of INR10b+. While a few details of the bid and the final awarding are still awaited, we believe the project can generate IRRs of 20%+ for IRB. announcing the second InvIT with GIC and (2) emergence as a winner in Mumbai-Pune project award, in a timely manner and that too as a sole bidder. We await final awarding of the project (recall that the project was scrapped earlier, but management suggested that rules do allow for awarding on second attempt if there is sole bidder) before incorporating it in our earnings. revenue declined 2.6% YoY to INR17b. EBITDA declined 6% YoY to INR7.1b and was 8% ahead of our estimate on account of higher margins. PAT came in at INR1.6b (-27% YoY) and was 12% below our estimate. Construction revenue grew 10% YoY to INR13.

IRB Infrastructure's (IRB) consolidated net profit grew by 15.7% y-o-y for Q2FY2020, led by strong execution along with lower ETR. Construction revenue reported 43% y-o-y rise, led by strong execution in Agra Etawah and Hapur Moradabad projects. However, BOT revenue declined by 16% y-o-y on account of handover of key project and muted traffic growth across projects barring couple of projects. OPM contracted by 413 BPS y-o-y on account of higher construction revenue booking (although construction segment's OPM improved...

IRB GIC deal is a game changer for company, IRB has secured means to partly fund its balance equity requirement of Rs 27.6bn. The free cash flow potential of the portfolio is Rs 880bn over the project lifecycle (~20yrs), with Rs 2bn/yr IRB share from first year. IRB will leverage this partnership to bid for upcoming BOT and TOT projects, though it will have to bring 51% of equity share. We maintain BUY. Key risks (1) Declining toll revenues in certain projects, (2) Market acceptability for BOT projects and (3) Delay in appointed dates in remaining HAM projects, contributing 25% to order book by value. IRB delivered strong 9/15/28% 2QFY20 Rev/EBIDTA/APAT beat. With limited visibility on NHAI BOT project awards we cut IRB EPC multiple from 6x to 4x 1-yr forward. We maintain BUY with a reduced TP of Rs 172/Sh.

23 October 2019 EPC revenue was up 42% YoY, implying strong execution of under- construction projects. EPC margin surprised at 29.1%, as lower-margin HAM projects are yet to commence construction. PBT declined by 4% YoY at INR3b, with lower depreciation cost getting offset by higher interest expense. Note that the Mumbai-Pune project completed its concession period during the quarter, leading to a decline in profit from the BOT portfolio. On account of the lower tax rate of 33.5% (v/s 44.9% in 2QFY19), net profit was up 16% YoY at INR2b (33% beat). stands at INR113.8b, with an EPC OB/rev ratio of just 1.9x. This provides low revenue visibility and may lead to a decline in EPC revenue in FY21 if road awarding does not pick up meaningfully over the near term. Moreover, two HAM projects in the order book continue facing challenges on land acquisition and there is a high probability of them being cancelled.

Announces | 4,400-crore deal with GIC at 1x P/BV IRB announced a | 4,400 crore deal with GIC Singapore. As part of the transaction, IRB will transfer nine of its BOT assets (portfolio) into a private infrastructure investment trust in which it will hold a controlling stake of 51%. EPC and O&M; contracts under this InvIT will continue to be with IRB. The deal has been done at 1x P/BV. GIC would infuse ~| 4,400 crore in the trust, which will consist of upfront payment of | 3,000 crore (to be utilised by IRB for debt reduction) and balance | 1,400 crore towards equity...

With GIC, IRB has secured means to partly fund its balance equity requirement of Rs 29.5bn. The free cash flow potential of the portfolio is Rs 880bn over the project lifecycle (~20yrs), with Rs 2bn/yr IRB share from first year. IRB will leverage this partnership to bid for upcoming BOT and TOT projects, though it will have to bring 51% of equity share. We maintain BUY. Key risks (1) Declining toll revenues in certain projects, (2) Market acceptability for BOT projects and (3) Delay in appointed dates in remaining HAM projects, contributing 25% to order book by value. IRB delivered strong 18/28% 1QFY20 EBIDTA/APAT beat. Private InvIT announcement with GIC (Rs 44bn investment for 49% stake, ~1x P/BV) removes BOT asset recycling overhang. We maintain BUY with a TP of Rs 212/Sh.

IRB Infrastructure's (IRB) consolidated net profit declined by 17% y-o-y on account of increased interest and depreciation led by inclusion of two tolling assets and higher tax outgo. Net revenue grew by 15% y-o-y, supported by EPC and BOT segments, while blended OPM remained steady y-o-y. The major highlight was the signing of a definitive agreement with GIC for transfer of nine assets (three operational and six under various stages of construction) in private InvIT with IRB having management control with 51% stake. The deal is valued at ~1x P/B, which...

Strong execution inadequate to fully offset weak traffic growth in BOT portfolio: EPC revenue was up 16% YoY, implying strong execution of underconstruction projects. EPC margin surprised at 28.7%, as lower-margin HAM projects (two of the total three) are yet to commence construction. Gross toll collection growth on a like-for-like basis was tepid at 2.7% and a major disappointment. On account of higher depreciation and interest expense...

Yet to receive appointed date for Tamil Nadu HAM projects IRB's consolidated order book declined to | 11,076.6 crore in Q4FY19 from | 12,167.3 crore in Q3FY19. The current OB implies order book-to-bill ratio of 2.4x on FY19 construction revenues, providing good revenue visibility ahead. In terms order inflow, it expects order inflows worth | 3000-5000 crore for BOT projects in FY20E. In terms of execution, it received appointed date and has commenced work on Vadodara-Kim HAM project in January, 2019. It received financial closure for other two HAM projects in Tamil Nadu....