IVRCL Infrastructure is a rapidly growing infrastructure company with irrigation as its forte. IVRCL has exposure to the segments of irrigation, buildings, roads and power, in the infrastructure domain.
The Company has bagged orders aggregating to the tune of Rs523 crore. A Work Order worth Rs287crore is for the survey, investigation, design, construction, testing and commissioning of Sewerage works in the district of Allahabad, UP, and has been awarded by the UP Jal Nigam, under the JNNURM scheme. The work order is to be executed in a time frame of 36 months.
The second lot of orders is worth Rs236 crore, and is for the construction segment. It includes construction-related works of five building towers, of twenty-one floors each, over an area measuring 11,90,000sq ft, a super-specialty hospital and the Construction of a Grand Maratha Hotel.
All the construction-related orders are awarded by Kakade Infrastructure, based out of Pune, Maharashtra. With the accretion of these orders, the order book of IVRCL Infra stands at Rs16,168 crore, or 2.5x its FY2010E revenues.
We have valued the stock using the SOTP methodology. The Construction segment has been valued at a P/E of 14x its FY2011E earnings (at a premium to its peers, due to a superior business model and excellent execution capabilities) and contributes Rs338 to our target price.
The Road BOT portfolio and IVRCL’s stake in IVR Prime and Hindustan Dorr-Oliver have been valued on a P/B and a discount-to-market valuation basis (20%), respectively, contributing Rs29 and Rs32 to our target price.
At Rs381, the Stock trades at a 15.8x FY2011E P/E and a 2.1x FY2011E P/BV, on a standalone basis. With the recent run up in the stock price and a potential upside of 4.7%, we recommend a NEUTRAL view on the stock.