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Buy IL&FS Transportation Networks – GS

August 23, 2010

Goldman Sachs has initiated Coverage on IL&FS Transportation Networks – ITNL with a BUY Rating. ITNL has 1,673 lane kms of road projects under construction and 3,683 under development as of March 31, 2010. We believe this will result in a sustained revenue stream from BOT project-related services, growing at 43% CAGR over FY10-FY13E. Expect 5 projects worth Rs77 bn (2 awarded in FY10 and 3 in 1QFY11) to achieve financial closure in the medium term, thus augmenting its financial and operational ability.

Order wins over the next 6-12 months from the Rs59 bn projects in which the company is currently at the Request for Proposal (RFP) stage of bidding should further strengthen its robust order book. ITNL will register 39% revenue CAGR over FY10-FY12E on the back of strong BOT project related services.

Sum of the parts valuation of ITNL in INR
Projects Under operation – 41
Projects under construction – 28
Toll – 24
Annuity – 3
Metro Rail – 1
Elsamex – 28
Projects Under Development – 39
Value of Construction Related Services – 179
Cash – 7
Value of Potential Orders – 31
Total Rs 353 which is also the 12 month target price for IL&FS Transportation Networks Ltd.

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