There are four reasons why IVRCL Infrastructures & Projects Ltd is a good investment opportunity. The first is that IVRCL has an excellent track record of execution of projects. The second is that IVRCL has a huge order book in excess of Rs. 23,000 crores (4 times FY 2010 revenue) resulting in earnings visibility. Thirdly, there has been a steep price correction in IVRCL’s shares in the past few weeks owing to poor Q1 FY 2011 results. There is also huge opportunity in the road, water, irrigation and other infrastructure projects for IVRCL
IVRCL has had a strong track record of growth and profits. IVRCL’s 3 year CAGR sales have grown 43.62% while its 3 year CAGR profit has grown 27.91%. IVRCL has a huge order book of about Rs. 23,000 crores equivalent to more than four times FY 2010 revenues which assures revenue visibility.
IVRCL reported disappointing results for Q1 FY 2011 and its share price got punished for that.
IVRCL’s sales in Q1 FY 2011 plummeted to Rs. 1106 crores as compared to Rs. 1890.42 crores in the Quarter ended March 2010. IVRCL’s Net Profit plummeted to Rs. 28.07 crores as compared to a Net Profit of Rs. 85.25 crores in the Quarter ended March 2010. In Q1 FY 2010, IVRCL had reported sales of Rs. 1086 crores and Net Profit of Rs. 35.11 crores. On a YOY basis, the sales have increased 1.9% while the PAT has plummeted 20%.
| IVRCL’s QUARTERLY RESULTS |
| Rs. in Cr. | Jun 2010 | Mar 2010 | Dec 2009 | Sep 2009 |
| Sales Turnover | 1,106.42 | 1,890.42 | 1,184.05 | 1,249.08 |
| Other Income | 0.88 | 1.98 | 3.90 | 5.72 |
| EBITDA | 101.64 | 200.42 | 119.48 | 120.19 |
| Net Profit | 28.07 | 85.25 | 45.82 | 48.77 |
IVRCL’s poor Q1 FY 2011 performance is attributable to a loss of revenue of Rs. 250 crores on account of three projects. From IVRCL’s management’s explanation, it appears that IVRCL’s woes may be temporary and represent an short-term aberration.
| IVRCL’S CORE RATIOS |
| Q on Q Sales Growth (%) | : -41.47 | Q on Q Net Profit Growth (%) | : -67.07 |
| 3 Yr CAGR Sales (%) | : 43.62 | 3 Yr CAGR Profit (%) | : 27.91 |
| Debt to Equity Ratio (x) | : 0.69 | Net Profit Margin (%) | : 4.43 |
| Return on Equity (%) | : 7.85 | EV to EBITDA (x) | : 12.13 |
In so far as the medium term is concerned, one can’t lose sight of the fact that IVRCL has a huge order book of about Rs. 23,000 crores representing more than 4 times FY 2010 revenue. IVRCL also has excellent execution skills as is brought out by its high growth rate and profitability in the past. Apart from the revenue visibility, IVRCL is engaged in a business of road, water, irrigation and other infrastructure projects for which there is a huge opportunity for IVRCL
IVRCL bagged one of the largest Road Toll projects of around Rs.3100 crores spanning over 122 kms on NH 17 section between Maharastra-Goa Border to Panaji-Goa-Karnataka Border from NHAI on DBFOT basis. The current order book position of IVRCL is around Rs. 23,275 crores including the lowest bids.
Performance of IVRCL’s listed Subsidiary Companies
IVRCL’s two subsidiaries Hindustan Dorr Oliver & IVRCL Assets Holding (formerly known as IVR Prime Urban Developers Limited) are also doing well. Hindustan Dorr Oliver is engaged in providing Engineered Solutions, technologies and EPC installations in Liquid-Solid Separation applications. Hindustan Dorr Oliver achieved a gross turnover of RS. 255 crores as against RS,183 crores, recording an increase of 39%. The Profit After Tax (PAT) has also increased by 31.21% from Rs 1:2.85 crores to Rs. 16.62 crores, resulting in an EPS of Rs.2.31.
IVRCL Assets & Holdings Limited has recorded a turnover of Rs.101 crores for the Q1 ended 30th June 2010 as against RS.0.25 Crores during the corresponding previous quarter.
IVRCL Assets & Holdings has undergone a major change during the previous financial year havinq amalgamated two of the asset holding companies of IVRCL Infrastructures & Projects Limited, By virtue of amalgamation, the projects of amalgamating companies viz.,Two Water projects of Rs.553 crores, Seven Road projects of Rs,7625 crores, An Oil tankage and other infrastructure related projects of about RS.3000 crores will be automatically executed by IVRCL Assets & Holdings Limited and as a result, the operations of IVRCL Assets & Holdings are expected to improve during the current financial year.
IVRCL Assets Holding started operating the Jalandhar-Amritsar toll road in May 2010. IVRCL Assets Holding’s Chennai water project also started in August 2010.
IVRCL’s Valuations:
In the past one month, IVRCL’s share price has plummeted 16% owing to the poor Q1 FY 2011 results. Given that IVRCL’s diluted EPS for FY 2010 was Rs. 7.8, the CMP of Rs. 162 is discounted 21 times. This is not at all expensive for an infrastructure company with the kind of order book and execution capability that IVRCL has. IVRCL‘s prospects will only improve given the huge thrust on road, water, irrigation and other infrastructure projects by the Government.
About IVRCL:
IVRCL Infrastructure and Projects Limited is engaged in the business of development and execution of Engineering, Procurement, Construction and Commissioning and Lump-sum Turn-key facilities in various infrastructure projects like water supply, roads and bridges, townships and industrial structures, power transmission etc for central/state governments, local bodies and private sector. IVRCL‘s specialization is in water related projects. This augurs well for IVRCL given the mega projects that various state governments are implementing. IVRCL is also interested in upcoming metro rail projects in major cities and port connectivity across the country. IVRCL also has ongoing projects in the buildings and Industrial structures sector. IVRCL also has a presence in the power transmission sector.
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