IRB Infrastructure Developers: Q1FY15 Results Analysis

IRB Infrastructure Developers announced its June quarter results and the performance of the company is on the expected lines.  According to street estimates, analysts expected consolidated profit after tax of the company to fall 13.2% year-on-year to Rs 117 crore and revenue to decline 4.2% to Rs 989 crore during the same period. While the actual topline for the June quarter stood at Rs 1010 crore, bottomline for the quarter stood at Rs 150.39 crore. 

On the expectations front, the operational performance was expected to be strong with the operating profit (EBITDA) rising 3.7% on yearly basis to Rs 472 crore and margins expanding 360 basis points to 47.7% in the quarter gone by. As per estimates, the better operational performance has resulted in better than expected bottomline. 

To put the figures in perspective, EBITDA for the quarter stood at Rs 562.75 crore as against Rs 441.99 crore posted in March 2014 and Rs 454.97 crore posted in June 2013. EBITDA margins improved significantly to 55.71% as against 50.06% in March 2014 quarter and 44.05% in June 2013. At the bottomline levels, the margins increased to 14.91% for June 2014 quarter as against 12.47% in March 2014 and 12.98% in June 2013. As on operational front, the 18% increase in Pune –Mumbai Express way toll for the quarter also helped the company’s financials.  Company has announced an interim dividend of Rs 2 per share. 

We had recommended IRB to our readers in our latest issue based on the following factors. Infrastructure space is catching up momentum and the sops it got in the recent Budget provides a much-needed impetus for many infra players. However, IRB Infrastructure Developers stands out as a good bet amongst its peers. The prime reason behind the same is that the company has been focusing on project execution instead of bidding recklessly for expensive projects. In the past, many infrastructure companies have gone bust as they pursued new projects even at the risk of compromising on margins. However, IRB has focused on completion of its earlier projects and has managed to sustain the return on equity at around 17% over the past two years. With a number of completed projects under its belt, the debt on these can be refinanced at lower rates. IRB focuses on large projects worth Rs 1000 crore or more where competition is limited, thereby providing enough breathing space on the margins front too. As mentioned earlier, the company stands out ahead of others on account of low leverage and well funded balance sheet. 

As for results, financial performance is better than the street estimates and stock is likely to witness an up-move on the bourses in medium term.