ivrcl infrastructure result updated

7/31/2019 IVRCL Infrastructure Result Updated

1/12

Please refer to important disclosures at the end of this report 1

EBITDA 103 178 (42.2) 95 8.6

Source: Company, Angel Research

IVRCL Infrastructure (IVRCL) reported disappointing numbers for 4QFY2012,

with lower-than-expected performance on all fronts. Order inflow for FY2012

was, however, commendable at ~`10,500cr, given the current scenario. The

companys order book stands at ~`28,000cr (5.6x FY2012 revenue, including L1

projects of `5,400cr). IVRCL Assets and Holdings has sold its Noida land (3parcels out of 4) and has received cash worth ~`200cr for the same. Further, the

company expects to sell the remaining parcel of land for ~`100cr. This

development is positive for the company as it will help to fulfill its equity

commitment (~`520cr) towards under construction road BOT projects in FY2013.

For 4QFY2012, IVRCLs revenue declined by

22.1% yoy to`1,598cr, below our estimate of`1,682cr. As per management,

3-4 projects not contributing to the revenue led to shortfall of `500cr-700cr.

During the quarter, the company posted dismal EBITDA margin of 6.4%,

registering a dip of 230bp yoy, below our estimate of 8.0% margin. There

was debtor provisioning of`50cr during the quarter, which pulled down the

companys margin. Interest cost for the quarter stood at `66.1cr, which wasflat on a yoy as well as qoq basis. On the earnings front, IVRCL reported a

92.3% yoy decline to`5cr, against our estimate of a 56.6% decline. This was

on account of poor performance on the revenue as well as margin front.

: We are revising our estimates downwards for FY2013

and FY2014 to factor in the companys poor quarterly performance and as

management is not confident of registering 15-20% revenue growth for FY2013,

given the headwinds faced by the company. IVRCL has a strong order book of

~`28,000cr (5.6x FY2012 revenue), which provides revenue visibility; however,

the company would need to focus on its execution pace going ahead, which has

not kept pace with order book growth.

% chg 2.9 (12.0) 10.8 22.0

% chg (25.3) (84.8) 181.2 80.8

EBITDA margin (%) 9.1 7.6 8.8 9.0

P/E (x) 7.9 52.1 18.5 10.3

RoAE (%) 8.2 1.2 3.4 5.8

RoACE (%) 11.6 6.4 8.0 9.3

P/BV (x) 0.6 0.6 0.6 0.6

EV/Sales (x) 0.6 0.8 0.7 0.7

EV/EBITDA (x) 6.2 10.0 7.8 7.3


CMP `47

Target Price `61

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 11.2

MF / Banks / Indian Fls 33.7

FII / NRIs / OCBs 34.2

Indian Public / Others 20.9

Abs. (%) 3m 1yr 3yr

Sensex (10.3) (11.9) 34.1

IVRCL (22.2) (37.2) (42.2)

2

16,3294,943

IVRC.BO

IVRC@IN

1,254

2.0

79/27

1,301,029

Infrastructure

Avg. Daily Volume

Market Cap (`cr)

Beta

52 Week High / Low

Face Value (`)

BSE SensexNifty

Reuters Code

022-39357800 Ext: 6842

[email protected]

Performance Highlights

4QFY2012 Result Update | Infrastructure

May 15, 2012


2/12

IVRCL Infrastructure | 4QFY2012 Result Update

May 15, 2012 2

Exhibit 1:4QFY2012 performance (Standalone)

Total expenditure 1,495 1,874 (20.2) 1,108 35.0 4,594 5,137 (10.6)

OPM (%) 6.4 8.7 (230)bp 7.9 (150)bp 7.6 9.1 (150)bp

Interest 66 66 0.7 66 0.1 260 218 19.3

Depreciation 27 22 23.7 23 17.6 97 76 28.7

Non operating income 5 4 26.4 1 455.2 17 12 39.1

Nonrecurring items - - - - -

Profit before tax 15 95 (83.8) 7 125.1 36 233 (84.5)

Tax 10 31 (66.0) 0 16035.7 12 75 (84.0)

Reported PAT 5 64 (92.3) 7 (27.1) 24 158 (84.7)

PAT (%) 0.3 3.1 - 0.6 - 0.5 2.8 -

Adjusted PAT 5 64 (92.3) 7 (27.1) 24 158 (84.7)

Adj. PAT (%) 0.3 3.1 (280)bp 0.6 (30)bp 0.5 2.8 (230)bp


Exhibit 2:4QFY2012 Actual vs. Angel estimates

Net Sales 1,598 1,682 (5.0)

EBITDA 103 135 (23.5)

Interest 66 66 0.1Tax 10 19 (43.7)

PAT 5 28 (82.3)


Revenue declines on slow execution

The companys revenue declined by 22.1% yoy to `1,598cr and was below

our estimate of `1,682cr. As per management, revenue for the quarter was

lower by ~`500cr due to: 1) delay in National Automotive Testing & R&D

Infrastructure Project (NATRIP), as its TPC was changed to ~`800cr from`450cr,

owing to change in its consultant; 2) delay in four BOP contracts by NTPC,because of which the company missed revenue worth `200cr-250cr; 3) delay in

the execution of a road project in Mumbai, where IVRCL could have generated

another`50cr of revenue.

BOT toll revenue and under construction/development project

update

As per management, three operational BOT projects contributed combined toll

revenue of`26cr (~`29lakhs/day) in 4QFY2012, which implies flat performance

on a sequential basis. For the full year, toll revenue stood at `94cr.


3/12


May 15, 2012 3

Work completed and toll revenue expectation by IVRCL on under construction road

projects is as follows:

1) Indore Gujarat 74%,`52lakhs/day

2) Chengapalli 42%,`70lakhs/day

3) Chandrapur 27%,`16lakhs/day

4) Baramati 51%,`10lakhs/day

IVRCL has an equity requirement of `520cr for FY2013 for its

under construction road projects, including the recently won projects.

Exhibit 3:Poor show on the revenue front continues


Exhibit 4: EBITDAM dips owing to low turnover


Poor top line and lower EBITDAM lead to a disappointing show

on the earnings front

For 4QFY2012, the company posted dismal EBITDA margin of 6.4%,

registering a dip of 230bp yoy, against and below our estimate of 8.0%

margin. There was debtor provisioning of `50cr during the quarter, which

pulled down the companys margin.

Interest cost for the quarter stood at`66.1cr, which was flat on a yoy as well

as qoq basis. On earnings front, IVRCL reported a 92.3% yoy decline to`5cr,

against our estimate of a 56.6% decline. This was on account of poorperformance on the revenue and margin front along with higher tax rate

(68%) during the quarter.

25.3

16.55.2 4.0

13.7

0.2

(11.7)

14.78.7

1.6(2.7)

(15.1)(22.1)

(45.0)

(35.0)

(25.0)

(15.0)

(5.0)

5.0

15.025.0

35.0

0

500

1,000

1,500

2,000

2,500

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

Sales (` cr, LHS) Growth (yoy %, RHS)

8.5 9.0 9.4 9.0

10.5

9.1 8.9

9.9

8.77.6

9.07.9

6.4

-

2.0

4.0

6.0

8.0

10.0

12.0

-

50.0

100.0

150.0

200.0

250.0

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

EBITDA (`cr, LHS) EBITDAM (%, RHS)


4/12


May 15, 2012 4

Exhibit 5:Earnings marred by various headwinds


Exhibit 6:Interest cost remains at elevated levels


Order book analysis

The companys order book stands at ~`28,000cr (5.6x FY2012 revenue, including

L1 projects worth`5,400cr) and is diversified across six segments. Order inflow for

FY2012 was commendable at ~`10,500cr, given the current gloomy scenario for

order awarding. As per management, IVRCL has irrigation orders of ~`6,653cr in

its order book for Andhra Pradesh, which are moving well and without any

payment issues.

Exhibit 7:FY2012 revenue break-up (`cr)


Exhibit 8:Order book break-up


4.9

3.9

4.8

3.2

4.0

3.5

4.5

2.52.2

3.0 3.1

0.40.8

0.60.3

-

1.0

2.0

3.0

4.0

5.0

6.0

0.0

10.0

20.0

30.0

40.0

50.060.0

70.0

80.0

90.0

2QFY09

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

PAT (` cr, LHS) PATM (%, RHS)

37.8

(6.5)(1.7)

(8.2)

4.2

42.6

(13.8)

6.1

23.2

10.9

(4.3)

3.9 1.3 0.1

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

3QFY09

4QFY09

1QFY10

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

Interest Cost (` cr) qoq growth (%)


5/12


May 15, 2012 5

Outlook and valuation

We are revising our estimates downwards for FY2013 and FY2014 to factor in the

companys poor quarterly performance. Our revised revenue estimates stand at

`5,510cr (earlier `5,758cr) and `6,722 (`6,860cr) for FY2013 and FY2014,

respectively, owing to the slowdown faced by the company on the execution front,

which is expected to persist for a few more quarters. We are factoring EBITDA

margin of 8.8% and 9.0% for FY2013 and FY2014, owing to the companys

FY2012 performance. On the earnings front, we expect the company to post

earnings of `68cr (earlier `125cr) and `122cr (earlier `161cr) for FY2013 and

FY2014, respectively.

Exhibit 9:Change in estimates

Revenue 5,758 5,510 (4.3) 6,860 6,722 (2.0)

EBITDA Margin 9.2 8.8 (4.4) 9.2 9.0 (2.2)

PAT 125 68 (45.9) 161 122 (24.1)

Source: Company

We have valued IVRCL on an SOTP basis. The companys core construction

business has been valued at P/E of 9x FY2013E EPS of `4.6 (`41/share), whereas

its stake in subsidiaries IVR Prime (`16/share) and Hindustan Dorr-Oliver

(`4/share) has been valued on mcap basis, post assigning a 20% holding

company discount. IVRCL has a strong order book of ~`28,000cr (5.6x FY2012

revenue), which provides revenue visibility; however, the company would need tofocus on its execution pace going ahead, which has not kept pace with its order

book growth.

Exhibit 10:SOTP valuation

Construction P/E 9x FY2014E earnings 1,100 41

IVRAH Mcap 20% holding company discount 429 16

Hindustan-Dorr-Oliver Mcap 20% holding company discount 111 4


Exhibit 11:Angel EPS forecast vs. consensus

FY2013E 2.5 3.7 (30.8)

FY2014E 4.6 5.1 (9.8)



6/12


May 15, 2012 6

Exhibit 12:Trading lower to its historical P/B multiple averages


-

1.0

2.0

3.0

4.0

5.0

15-May-05

15-Nov-05

15-May-06

15-Nov-06

15-May-07

15-Nov-07

15-May-08

15-Nov-08

15-May-09

15-Nov-09

15-May-10

15-Nov-10

15-May-11

15-Nov-11

15-May-12

P/B 5YEAR AVG 3YEAR AVG 7YEAR AVG


7/12


May 15, 2012 7

Exhibit 13:Recommendation summary

ABL 200 302 Buy 1,522 2,014 2,294 22.7 18.0 28.4 30.8 30.8 11.1 7.1 6.5 4.2CCCL 15 - Neutral 2,145 2,526 2,792 14.1 (1.1) 1.8 2.8 - - 8.1 5.2 2.7

HCC 19 - Neutral 3,988 4,239 4,522 6.5 (3.7) (1.8) (0.8) - - - - 3.8

IRB Infra 112 186 Buy 3,131 3,821 4,582 21.0 14.9 15.0 16.9 6.5 7.5 7.5 6.6 -

ITNL 161 265 Buy 5,606 6,619 7,925 18.9 25.6 22.0 26.7 2.1 6.3 7.3 6.0 4.3

JP Assoc. 63 104 Buy 13,963 16,017 18,359 14.7 2.9 4.2 5.0 30.9 21.5 15.0 12.5 -

L&T 1,223 1,553 Buy 53,171 59,559 69,089 14.0 64.7 70.8 76.5 8.7 18.9 17.3 16.0 2.7

Madhucon 46 84 Buy 1,952 2,503 2,903 21.9 4.4 5.8 6.5 21.8 10.5 8.0 7.1 3.8

NCC 34 76 Buy 4,946 5,790 7,022 19.1 1.4 3.5 5.4 97.6 24.3 9.6 6.2 4.3

Patel Engg 90 - Neutral 3,573 3,609 3,836 3.6 14.9 14.0 14.5 (1.1) 6.0 6.4 6.2 2.7

Punj Lloyd 45 - Neutral 10,557 11,592 12,993 10.9 2.8 1.8 3.2 7.2 16.4 24.9 14.2 2.6

Sadbhav 133 199 Buy 2,604 2,989 3,314 12.8 9.3 10.2 11.3 10.5 14.3 13.1 11.7 2.7

Simplex In. 204 316 Buy 5,929 6,732 7,902 15.4 19.6 27.2 35.1 33.9 10.4 7.5 5.8 2.9


Exhibit 14:SOTP break-up

ABL 128 42 - - 174 58 - - - - 302

CCCL 20 100 - - - - - - - - 20HCC (5) (20) 12 50 16 70 - - - - 23

IRB Infra 98 59 - - 64 39 4 3 - - 166

ITNL 53 20 - - 180 68 - - 33 12 265

JP Assoc. 34 32 27 26 - - - - 43 42 104

L&T 1,223 79 - - - - 330 21 - - 1,553

Madhucon 33 39 2 2 50 59 - - - 84

NCC 43 57 2 2 10 13 - - 22 28 76

Patel Engg 55 51 17 16 16 15 - - 19 18 106

Punj Lloyd 72 100 - - - - - - - - 72

Sadbhav 102 51 - - 98 49 - - - - 199

Simplex In. 316 100 - - - - - - - - 316



8/12


May 15, 2012 8

Profit and loss (Standalone)

Less: Excise duty

Other operating income

% chg 36.1 10.3 2.9 (12.0) 10.8 22.0

Total Expenditure 4,559 4,961 5,137 4,594 5,026 6,118

Net Raw Materials 1,658 1,915 1,990 1,725 1,824 2,211

Other Mfg costs 2,687 2,825 2,864 2,609 2,926 3,570

Personnel 214 221 284 260 276 336

Other - - - - - -

% chg 16.7 26.0 (3.1) (26.7) 28.3 24.8

(% of Net Sales) 8.5 9.7 9.1 7.6 8.8 9.0

Depreciation& Amortisation 47 54 76 97 106 131

% chg 14.0 27.4 (8.0) (36.3) 35.0 25.2

(% of Net Sales) 7.5 8.7 7.8 5.6 6.9 7.0

Interest & other Charges 198 212 263 260 299 314

Other Income 97 64 57 17 22 23

(% of PBT) 35.6 19.4 24.3 46.3 21.6 12.6

Share in profit of Associates - - - - - -

% chg (4.0) 20.1 (29.3) (84.5) 178.1 80.8

Extraordinary Expense/(Inc.) - - - - - -

Tax 47.8 117.5 74.7 11.9 32.5 58.7

(% of PBT) 17.5 35.7 32.1 33.2 32.4 32.4

Add: Share of earn. of asso - - - - - -

Less: Minority interest (MI) - - - - - -

Prior period items - - - - - -

% chg 7.4 (6.5) (25.3) (84.8) 181.2 80.8

(% of Net Sales) 4.5 3.8 2.8 0.5 1.2 1.8

% chg 7.4 (6.5) (25.3) (84.8) 181.2 80.8


9/12


May 15, 2012 9

Balance sheet (Standalone)

Equity Share Capital 27 53 53 53 53 53Preference Capital - - - - - -

Reserves& Surplus 1,784 1,800 1,934 1,939 1,988 2,092

Minority Interest

Total Loans 1,398 1,613 2,096 2,692 2,745 3,243

Deferred Tax Liability 12 12 9 9 9 9

Gross Block 662 750 924 1,004 1,129 1,267

Less: Acc. Depreciation 142 184 232 330 436 568

Capital Work-in-Progress 20 35 26 42 43 44

Goodwill - - - - - -

Inventories 209 245 273 300 350 448

Debtors 1,343 2,196 2,181 2,182 2,190 2,392

Cash 101 164 143 171 214 110

Loans & Advances 1,199 661 953 1,090 1,268 1,625

Other 1,162 1,686 2,153 2,083 2,263 2,622

Current liabilities 1,523 2,437 2,713 2,271 2,685 3,037

Mobilisation Advance 200 251 251 264 277 291

Misc. Exp. not written off - (1) - - - -


10/12


May 15, 2012 10

Cash flow (Standalone)

Profit Before Tax 274 329 233 36 100 181

Depreciation 47 54 76 97 106 131Change in Working Capital 398 248 497 525 (11) 649

Less: Other income 97 64 57 17 22 23

Direct taxes paid 48 129 75 12 32 59

(Inc.)/ Dec. in Fixed Assets (210) (104) (165) (96) (126) (138)

(Inc.)/ Dec. in Investments (48) (105) (21) (50) (50) (50)

Other income 97 64 57 17 22 23

Issue of Equity - - - - -

Inc./(Dec.) in loans 330 220 483 596 53 498

Dividend Paid (Incl. Tax) (19) (21) (18) (19) (19) (19)

Others (4) 68 (37) - - -

Inc./(Dec.) in Cash (76) 63 (21) 28 43 (104)


11/12


May 15, 2012 11

Key ratios

P/E (on FDEPS) 5.5 5.9 7.9 52.1 18.5 10.3P/CEPS 4.6 4.7 5.4 10.3 7.2 4.9

P/BV 0.7 0.7 0.6 0.6 0.6 0.6

Dividend yield (%) 3.0 3.2 3.4 3.6 3.8 3.8

EV/Sales 0.5 0.5 0.6 0.8 0.7 0.7

EV/EBITDA 6.0 5.1 6.2 10.0 7.8 7.3

EV / Total Assets 0.8 0.8 0.8 0.8 0.8 0.8

EPS (Basic) 16.7 7.8 5.9 0.9 2.5 4.6

EPS (fully diluted) 8.5 7.9 5.9 0.9 2.5 4.6

Cash EPS 10.2 9.9 8.8 4.6 6.5 9.5

DPS 1.4 1.5 1.6 1.7 1.8 1.8

Book Value 67.8 69.4 74.4 74.6 76.5 80.3

EBIT margin 7.5 8.7 7.8 5.6 6.9 7.0

Tax retention ratio 82.5 64.3 67.9 66.8 67.6 67.6

Asset turnover (x) 1.8 1.7 1.6 1.2 1.2 1.4

ROIC (Post-tax) 11.0 9.5 8.2 4.4 5.6 6.5

Cost of Debt (Post Tax) 13.3 9.1 9.6 7.3 7.4 7.1

Leverage (x) 0.6 0.7 0.9 1.1 1.3 1.4

Operating ROE 9.5 9.9 7.0 1.2 3.3 5.6

ROACE (Pre-tax) 12.7 14.2 11.6 6.4 8.0 9.3

Angel ROIC (Pre-tax) 13.3 14.8 12.1 6.6 8.3 9.6

ROE 13.2 11.5 8.2 1.2 3.4 5.8

Asset Turnover (Gross Block) 9.2 7.8 6.8 5.2 5.2 5.6

Inventory / Sales (days) 15 15 17 21 22 22

Receivables (days) 80 118 141 160 145 124

Payables (days) 94 142 180 194 175 166

W.cap cycle (ex-cash) (days) 146 143 152 210 206 186

Net debt to equity 0.7 0.8 1.0 1.3 1.2 1.5

Net debt to EBITDA 3.1 2.7 3.8 6.7 5.2 5.2

Interest Coverage 1.9 2.2 1.7 1.1 1.3 1.5


12/12


May 15 2012 12

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

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trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

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Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, pleaserefer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited andits affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement IVRCL

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

ivrcl infrastructure result updated

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