Maintain ‘reduce’ on IRB Infrastructure with a revised target price of R230 (earlier R210). Based on nine months performance and assuming contribution from Yedeshi-Aurangabad by February 2015, we expect an 18% y-o-y decline in FY15 revenues. We build in slightly stronger traffic growth for FY15/16 and lower our discount rate by 100 bps for operational projects to 12.5%.
IRB reported strong BOT results with toll revenues seeing a strong 25% growth due to increase in toll rates and 10% traffic growth in mature projects. The key increase was in Mumbai-Pune (16%) while other major mature assets grew 5-8%. Ahmedabad-Vadodara’s revenues grew 30% y-o-y because of higher traffic contribution from NH-8 (expected to stabilise over coming quarters). Revenues from recently commissioned projects did not meet targets. We build in a traffic growth of 7-8% for FY16 and then assume 6% growth for the rest of the concession period.
While IRB said that the pipeline for NHAI’s orders is strong, it hinted at a cautious stance in terms of bidding for such orders. It has already won 400 km of orders in FY15 (more than its target of 300 km for the year). Firm equity commitments of R3,000 crore over the next three years will limit its potential to bid for incremental projects. IRB is yet to go ahead with its plans to raise R1,500 crore.
By Kotak Institutional Equities