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IRB Infra – Banking on Roads – Stock Price Ahead of Fundas

November 6, 2009

IRB Infra could largely benefit from the road infra-layout of the Government if it continues to exercise restrain and focus on bagging high RoEs orders only. The company is embarking on a new strategy that could give it additional management bandwidth for execution.

NHAI appears to be on course to award road projects at a run-rate of 4,000-6,000 kms per year for the next five years. With a market share of ~8% for projects awarded so far, IRB could largely benefit from the increase in road projects.

2QFY10 results were ahead of estimates primarily on better than expected margins. Construction margin at 20.7% recorded an improvement of 230bps QoQ.

EPS estimates of IRB Infra:
Nomura – 10 and 13 for fy10 and fy11 respectively
Deutsche Bank – 12 and 17 for fy10 and fy11 respectively
UBS – 11 and 13 for fy10 and fy11
Kotak – 11 and 14 for fy10 and fy11 respectively

It appears to be slightly higher at 240 levels.

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