Analyst Corner: Maintain ‘neutral’ on IRB Infra with TP at Rs 122

IRB’s consolidated financials are not comparable Y-o-Y due to the monetisation of nine assets through the InvIT route and consolidation of the Mumbai-Pune Phase II project. The Construction business reported a revenue/Ebitda/adjusted PAT decline of 22%/22%/53% Y-o-Y. Normalcy in traffic led to strong (32% Q-o-Q) growth in collections across 13 toll assets of IRB and IRB InvIT. Though losses from the associates reduced sequentially, higher depreciation from Mumbai-Pune Phase II project led to a 29% miss on our earnings estimate in spite of a beat on our revenue estimate. For 9MFY21, adjusted PAT stood at Rs 197 million (v/s Rs 5.7 billion in 9MFY20).

Cash flow visibility has improved meaningfully due to the Mumbai-Pune Phase II project. Construction order book (OB) remains weak, with OB-to- revenue ratio of 1.1x, thereby increasing dependency on new order wins. We cut our FY21E/FY22E/FY23E EPS by 7%/5%/10% due to higher depreciation in the BOT segment. Though NHAI has ramped up ordering, with 4QFY21 expected to witness higher order wins, any weakness in order wins may pose a downside risk to our earnings estimates. We maintain ‘neutral’, with a SoTP-based TP of Rs 122 per share. Any favorable outcome from the Ahmedabad-Vadodara Expressway arbitration may pose an upside risk to our TP.