Buy IRB Infra post net profit up 94% in Q3 and & 10:1 stock split declaration?

IRB Infrastructure Developers, an engineering and development firm, has also announced a 10:1 stock split. IRB Infra has set Wednesday, February 22, 2023 as the record date to determine shareholders’ eligibility for the aforementioned corporate action. Find out from the experts of various brokerage companies what individuals should do with the stock after the stock split announcement and the net profit double in Q3.

The research analysts of Kotak Securities said in a note that “IRB’s results reflected improved performance across EPC and toll collections. Healthy toll collection and commencement of work at Ganga Expressway to scale up consolidated revenues further. Ordering activity has remained weak for the sector. We cut estimates by 3% on lower ordering assumptions and retain an SoTP-based Fair Value to Rs340 on roll forward to March 2025 estimates. We cut our estimates by 3% to take into account lower ordering and amortization charges. Net of roll forward, we maintain our Fair Value of Rs340 based on SoTP, valuing the core business at 7X EV/EBITDA on March 2025 estimates. Retain BUY.”

The research analysts of HDFC Securities said “IRB reported revenue/EBITDA/APAT of INR 15.1/7.4/1.4bn, (behind)/ahead of our estimates by (0.5)/7.1/32%. EBITDA margin came in at 49.2%, beating our estimate of 45.7%. Consequently, APAT came in at INR 1.4bn (+94.5%/+3.2x YoY/QoQ a 32% beat). IRB refinanced the project loan for another private InvIT SPV through the issuance of NCDs with fixed coupon rate of 8.9% p.a. As of Dec’22, the order book (OB) stood at INR 191.2bn (~3.2x of FY23E revenue). The consolidated gross debt reduced to INR 126.7bn vs. INR 127.1bn, as of Sep’22. IRB expects to infuse equity of INR 2/7/2bn in Q4FY23/FY24/FY25. It guided for order inflow (OI) of INR 60-80bn for Q4FY23 and a construction revenue of INR 45bn for FY23. We maintain ADD rating on the stock with an increased SOTP target price of INR 306/sh as we roll forward to Dec-24 estimates. EPS change is reflective of a better margin on improved toll.”

The research analysts of Motilal Oswal said “IRB’s order book is strong at INR191b (incl. O&M). IRB received appointed date for the Ganga Expressway project during 3QFY23. As some of these large projects move into execution, we expect EPC growth to improve going ahead. We increase our PAT estimates for FY23/FY24 by 3%/10%, respectively. We reiterate our Neutral rating with an SoTP-based TP of INR295.”

The research analysts of Anand Rathi said “Construction at the recently appointed Ganga Expressway stabilising, and as the post-Q3 appointment of Chittor-Thachur hybrid annuities pave the way for this project to start contributing, the stage seems set for better scale in the immediate future. The current core-project OB, though, good for the near-term, needs to be augmented at the earliest. Management, citing healthy prospects, is sanguine of adding to keep growing. The BOT-toll division continues to benefit from rising traffic and periodic rate-revisions. The ongoing commitment to check capital intensity (and churn assets for more growth) stays, and the recent monetisation of a hybrid annuity, thus, is an augury. On the reassuring outlook, we retain our Hold rating, at a higher TP of Rs309 (on asset sale and raised estimates).”

The research analysts of DAM Capital said “IRB is the only pure play road toll operator in the listed space. With the marquee new investors in company and deleveraging, we expect renewed investor interest in the sector and expect stock to re-rate over next few years. We expect growth aspirations to improve on back of large investors and a deleveraged balance sheet. Besides, the improving traffic on roads bodes well for the earnings. Increasing monetisation opportunities will further aid in increasing opportunity basket for company. We value its BOT business (including private INVIT) at Rs70bn, EPC business at Rs35bn and revise our SOTP based TP for IRB at Rs322. We maintain buy rating on stock with CMP Rs.290, with TP providing 11% upside.”

The research analysts of Antique Stock Broking Ltd said “With improved credit rating, IRB Infrastructure Developers’ (IRB) finance expenses are lower than expected. And subsequently, the company is refinancing its debt. With progress on HAM project, IRB’s EBITDA margin narrows to 29%. Execution remains flat, given modest order backlog. With Modern Road Makers (MRM) execution on track, we retain our estimates. Using SoTP valuation, we value IRB at INR 329/share. We retain BUY.”

On Friday, the shares of IRB Infrastructure Developers Limited closed on the NSE at ₹288.80 apiece, down by 1.05% from the previous close of ₹291.85. The stock recorded a total volume average of 1,122,195 shares and a delivery volume average of 57,557,382 shares or 51.29%. The stock touched a 52-week-high of ₹329.40 on (14-Dec-2022) and a 52-week-low of ₹178.90 on (20-Jun-2022).

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