IRB Infra – Result beats estimates; reiterate ‘buy’ with TP Rs.250

 IRB Infra has reported better than expected numbers for 1QFY12. Buy rating is maintained with a target price of Rs.250 over one year. The stock is our top pick in this space.

 Company has reported 1Q revenue of Rs.800 crore, an increase of 50% yoy and above the street estimates.

 EBITDA increased 22% yoy to Rs.330 crore and well above market estimates.

 Net profit increased 14% yoy to Rs.130 crore, beating market expectations.

 Strong performance was led by the construction division. Construction revenue increased 81% to Rs. 600 crore with better margin.

 EBITDA margin of the construction division at 25.9% is 590 bps higher than market estimates. Better margin from Surat – Dahisar project has helped the company to report better than expected margin from the construction division.

 Toll revenue increased 14% yoy to Rs.230 crore, mainly due to 18% toll hike in Mumbai – Pune project. Surat – Dahisar project reported 6.8% increase in toll revenue to Rs.94.2 crore, Bharuch – Surat project reported 12.8% yoy increase in toll revenue to Rs.33.6 crore. Tumkur – Chitradurga project operational since June also contributed Rs.11.4 crore to toll revenue.

 However, interest expenses were 33% higher than market estimates and this has led to 33% miss in tolling PAT.

 As mentioned in the earlier report, four major projects worth of Rs.9300 crore are coming up for bidding in the near term. It includes Rs.5400 crore Kishangarh – Ahmedabad project and Rs.1900 crore Jabalpur –Rewa project. Any project win will be a major catalyst for the stock price.

 IRB Infra is preferred in this space because of its execution capabilities and access to financing. Buy rating on the stock is reiterated with a target price of Rs.250 over one year.