For 2QFY2012, on a consolidated basis, IL&FS Transportation Networks (ITNL)
posted strong numbers on the top-line front, however the marginal fall in
EBITDAM and high interest cost led to modest bottom-line growth. Robust
revenue growth came from pick-up in the execution of under construction
projects. We believe ITNL is well placed to leverage on the upcoming
opportunities in the road sector on account of being a leader with a robust order
book and diversified portfolio. Further, we like the conservative bidding strategy
of ITNL (the company has refrained itself from aggressive bidding unlike its
peers), which ensures that the quality of BOT projects is not diluted. Hence, we
maintain our Buy recommendation on the stock.
Robust performance continues: The company’s revenue for the quarter came at
in `1,256cr (`883cr), registering 42.1% yoy/14.9% qoq growth, primarily due to
higher revenue of the C&EPC segment (up 73.2% yoy). EBITDA margin for the
quarter stood at 28.4% vs. 29.6% in 2QFY2011, down 120bp, mainly on
account of increased contribution from the relatively low-margin C&EPC
segment, as expected. ITNL’s interest cost during the quarter grew by 72.3%
yoy/18.8% qoq to `169.4cr (`98.3cr). This resulted in modest bottom-line
growth of 8.2% yoy to `116.2cr (`107.5cr).
Outlook and valuation: ITNL has not bagged any order (from NHAI) since the
last few quarters, owing to the aggressive bidding witnessed in the road sector.
Management believes that this prolonged aggressive bidding will continue for
couple of more quarters, and management would not change its conservative
strategy given decent share of work in hand (OB of 5.2xFY2011 C&EPC
revenue). Against this backdrop, we have revised order inflow targets for
FY2012. We have valued ITNL on an SOTP basis by assigning 6x EV/EBITDA to
its standalone business and have valued its investments on DCF/Mcap/BV basis
on FY2013E to arrive at a target price of `260/share, implying an upside of
27.9% from current levels. We maintain our Buy recommendation on the stock.
posted strong numbers on the top-line front, however the marginal fall in
EBITDAM and high interest cost led to modest bottom-line growth. Robust
revenue growth came from pick-up in the execution of under construction
projects. We believe ITNL is well placed to leverage on the upcoming
opportunities in the road sector on account of being a leader with a robust order
book and diversified portfolio. Further, we like the conservative bidding strategy
of ITNL (the company has refrained itself from aggressive bidding unlike its
peers), which ensures that the quality of BOT projects is not diluted. Hence, we
maintain our Buy recommendation on the stock.
Robust performance continues: The company’s revenue for the quarter came at
in `1,256cr (`883cr), registering 42.1% yoy/14.9% qoq growth, primarily due to
higher revenue of the C&EPC segment (up 73.2% yoy). EBITDA margin for the
quarter stood at 28.4% vs. 29.6% in 2QFY2011, down 120bp, mainly on
account of increased contribution from the relatively low-margin C&EPC
segment, as expected. ITNL’s interest cost during the quarter grew by 72.3%
yoy/18.8% qoq to `169.4cr (`98.3cr). This resulted in modest bottom-line
growth of 8.2% yoy to `116.2cr (`107.5cr).
Outlook and valuation: ITNL has not bagged any order (from NHAI) since the
last few quarters, owing to the aggressive bidding witnessed in the road sector.
Management believes that this prolonged aggressive bidding will continue for
couple of more quarters, and management would not change its conservative
strategy given decent share of work in hand (OB of 5.2xFY2011 C&EPC
revenue). Against this backdrop, we have revised order inflow targets for
FY2012. We have valued ITNL on an SOTP basis by assigning 6x EV/EBITDA to
its standalone business and have valued its investments on DCF/Mcap/BV basis
on FY2013E to arrive at a target price of `260/share, implying an upside of
27.9% from current levels. We maintain our Buy recommendation on the stock.
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