Key highlights from the results
IL&FS Transportation Networks (ITNL) reported top-line of `1,656cr (`733.7cr), a sequential growth of 125.7% primarily due to the jump in C&EPC segment revenues. As per company policy, revenues are not recognized till 10% threshold limit is achieved so during 4QFY11, ITNL has achieved threshold limit in Jorbat Shillong and Moradabad Bareilly projects which has given a boost to its revenues. Further, the standalone revenues witnessed a stunning jump of 190% on qoq basis due to ramp-up in execution of projects and significant rise in fee income from MP Border check post, Jharkhand road and Chandrapur Warora projects. Operating margins stood at 24.8% in 4QFY2011 v/s 30.1% in 3QFY2011 a drop of 530bps mainly on account of increased contribution from the low margin C&EPC segment as expected. Bottom-line grew by 158.3% sequentially to `159.2cr (`61.6cr) primarily due to stupendous top-line growth. ITNL’s order book as of 31 March 2011 stood at `9,290cr (5.5x FY2011 revenues) excluding L1 orders worth `1,660cr.
Quarterly Performance (Consolidated)
| Y/E March (` cr) | 4QFY11 | 3QFY11 | % chg(qoq) | FY2011 | FY2010 | % chg |
| Income from Operations | 1,655.8 | 733.7 | 125.7 | 4,048.8 | 2,413.1 | 67.8 |
| Total Expenditure | 1,244.6 | 512.9 | 142.6 | 2,893.9 | 1,608.8 | 79.9 |
| Operating Profit | 411.2 | 220.7 | 86.3 | 1154.9 | 804.4 | 43.6 |
| OPM (%) | 24.8 | 30.1 | (530)bp | 28.5 | 33.3 | (480)bp |
| Interest | 179.0 | 115.3 | 55.3 | 498 | 294.1 | 69.4 |
| Depreciation | 18.4 | 15.8 | 16.2 | 61 | 60.3 | 1.8 |
| Non Operating Income | 25.3 | 17.4 | 45.9 | 79 | 74.2 | 6.0 |
| Nonrecurring items/Dividend from SPV's | - | - | - | - | - | - |
| Profit Before tax | 239.2 | 107.0 | 123.6 | 674.0 | 524.1 | 28.6 |
| Tax | 68.9 | 44.8 | 53.8 | 224 | 185.8 | 20.7 |
| PAT | 170.3 | 62.2 | 173.7 | 449.7 | 338.3 | 32.9 |
| Share of Profits/ (Losses) of Asso. | (15.3) | 1.6 | - | (12.1) | (2.6) | - |
| Share of Profits/ (Losses) of MI | 4.2 | 2.2 | - | (4.8) | 8.7 | - |
| PAT after MI and Share of Assoc. | 159.2 | 61.6 | 158.3 | 432.9 | 344.4 | 25.7 |
| PAT (%) | 9.6 | 8.4 | 120bp | 10.7 | 14.3 | (360)bp |
| FDEPS (`) | 8.19 | 3.17 | 158.3 | 22.28 | 17.73 | 25.7 |
Source: Company, Angel Research
Outlook and valuation: The lull in the awarding activity in the road sector for the last few quarters had negatively affected the infra sector’s performance on the bourses. However, the awarding activity has picked up in the last couple of months, thus presenting opportunities for road developers and ITNL being the market leader is expected to fare well. Going ahead, we are optimistic on the road segment, given the quantum of opportunities lined up in the sector and the resultant bidding pipeline. We have valued ITNL on SOTP basis, by assigning 5.5x EV/EBITDA to its standalone business and valued its investments on DCF/Mcap/BV basis on FY2013 estimates to arrive at our target price of `317/share, implying an upside of 50.7% from current levels.
Key Financials (Consolidated)
| Y/E March (`cr) | FY2010 | FY2011 | FY2012E | FY2013E |
| Net Sales | 2,403 | 4,049 | 5,032 | 6,850 |
| % chg | 96.1 | 68.5 | 24.3 | 36.1 |
| Adj. Net Profit | 344.4 | 432.8 | 552.9 | 585.7 |
| % chg | 1,212.8 | 25.7 | 27.7 | 5.9 |
| FDEPS (`) | 17.7 | 22.3 | 28.5 | 30.2 |
| EBITDA Margin (%) | 33.1 | 28.5 | 25.7 | 19.5 |
| P/E (x) | 11.9 | 9.4 | 7.4 | 7.0 |
| RoAE (%) | 26.2 | 22.9 | 23.9 | 20.8 |
| RoACE (%) | 17.9 | 16.6 | 12.8 | 9.5 |
| P/BV (x) | 2.4 | 2.0 | 1.6 | 1.3 |
| EV/Sales (x) | 2.9 | 2.0 | 2.1 | 2.0 |
| EV/EBITDA (x) | 8.6 | 6.9 | 8.2 | 10.3 |
Source: Company, Angel Research
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