IRB infrastructure that is neutral; Motilal Oswal aims for Rs 33

 IRB infrastructure that is neutral; Motilal Oswal aims for Rs 33

In its research report dated October 30, 2023, Motilal Oswal suggested a Neutral rating on IRB Infrastructure with a target price of Rs 33.

The IRB Infrastructure study paper by Motilal Oswal

In 2QFY24, IRB Infrastructure's revenue increased by 30% YoY to INR17.5b, 14% more than our projection. EBITDA margin was 45.5%, which was 400 basis points lower than our predicted margin of 48%. EBITDA reached INR7.9b, up 19% YoY (9% beat). rising losses in joint ventures and associates and rising interest costs more than offset the substantial other income. Consequently, APAT increased 12% YoY to INR1.0b, in keeping with our prediction. income from construction increased 36% YoY to INR11.8b, while income from BOT increased 19% YoY to INR5.7b. The order book was at ~INR327b (excl GST) at 2Q end. There were INR251b in the O&M order book and INR75.5b in the building order book. For ToT bundle 12, IRB has emerged as the top bidder, receiving an INR44 billion upfront payment. The ~316 km (~1,267 lane km) segment will be subject to tolling and operations and maintenance (O&M) throughout a 20-year revenue-linked concession term. The project will add about INR 39 billion to IRB's order book, which will include approximately INR 6 billion for EPC and approximately INR 33 billion for O&M. During the project's first year of operation, positive cashflow is anticipated.

Prospects

Healthy revenue visibility is provided by a robust order book of INR327b as of September 23 and the start of its Hyderabad ORR project. Strong order inflows are anticipated for the remainder of FY24 due to the continued strength of the tender pipeline, which is driven by BOT projects. Over FY23–25, we project a revenue CAGR of around 13%. For FY25, we slightly raise our APAT forecast by 3%. We maintain our Neutral rating with a TP of INR 33 per share based on SoTP.