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IL&FS Transportation Networks (ITNL), an established surface transportation player, is a pure play on the emerging opportunities in the road segment. We expect ITNL to post CAGR of 59% in consolidated top-line over FY2010-12 owing to its recent order winning spree and bidding pipeline. However, given the increasing share of low-margin C&EPC (refer annexure I) in consolidated top-line, we expect EBITDA margins to normalise to 19.8% in FY2012 from 33.1% in FY2010. During the mentioned period, we estimate the company’s bottom-line to log a CAGR 21%. We have valued ITNL on SOTP basis wherein we have assigned 7.5x EV/EBITDA to its standalone business and its investments have been valued on DCF/Mcap/BV basis. Our Target Price works out to Rs358, implying an upside of 13.4% from current levels. On a relative basis, we prefer ITNL over IRB on account of cheaper valuation and diversified portfolio. We Initiate Coverage on ITNL with an Accumulate recommendation.Download Full Report