IVRCL Infrastructures & Projects Ltd. BUY CMP: Rs379
IVRCL is the biggest player in the water management vertical in India, accounting for 46% of the company’s revenues in FY06. With continued focus on this vertical by certain states, we expect this vertical to contribute to 50.5% of IVRCL’s turnover in FY07 and 53.1% in FY08. The award of India’s first desalination project to be constructed in Chennai, is testimony of IVRCL’s strong position in the segment. We assign a value of Rs6 per share to this project.
IVRCL’s 51.4% controlling stake in Hindustan Dorr-Oliver (HDO) enables access to HDO’s expertise to be leveraged for EPC projects in the water segment, completing the value chain in this segment. We include this investment in our target price calculations at the present market value of IVRCL’s equity of Rs1,640mn, translating into Rs13.7 per share.
IVRCL has a well diversified portfolio with an order backlog of Rs67bn at present, translating into 4.5x its FY06 sales, which is among the highest in the construction space. The order intake/execution is at a healthy 2.5x, signifying high growth in FY07 and FY08.
With three toll based road BOTs valued at Rs10.8bn, either having achieved or nearing financial closure, IVRCL plans to bid for some more and foray in BOTs in power T&D as well. We foresee IVRCL as a major player in the BOT space in future and value these three projects at Rs15.6 per share of IVRCL.
The sale of the balance 25% residential land in Hyderabad is expected to fetch Rs1.65bn in FY07. Around 40% of the 11.83 acres commercial portion is expected to be sold in FY08 and the balance in FY09. We value the commercial portion at the market price of unsold land post 25% discount, giving Rs29.7 per share of IVRCL.