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IL&FS Transportation Networks Ltd Research Report - 22nd Jul 2016

Infrastructure | Published on Jul 22nd 2016


Strong revenue & cash flow generation visibility: At 4QFY2016-end, IL&FS Transportation Networks Ltd (ITNL) reported gross Toll & Annuity income of Rs7.8cr/day (Toll Income at Rs5.4cr/day and Annuity Income at Rs2.9cr/day). 7 BOT projects (2 Annuity + 5 Toll) are expected to be operational in next few months. On being fully operational, all 5 Toll projects (BKEL, PSRDCL, BAEL, KNCL, KSEL) in FY2017E would contribute additional toll of Rs1.5cr/day. Further, there’s strong visibility on assured revenues from Annuity projects. Of the 3 Annuity projects, JSEL, has already received provisional completion certificate and other 2, CNTL & TRDCL P-III are expected to be operational in 1Q/2QFY2017E. Annuity business insulated from traffic volumes is expected to generate assured gross revenue of Rs2.2cr/day in FY2017E (~58% of incremental revenues in FY2017E would be from the assured Annuity business). Profit to grow 13.6% CAGR during FY2016-18E: Commencement of 7 BOT projects coupled with ongoing strategic initiatives such as asset sales, debt re-financing (across project levels), listing of InvITs, in our view would help ITNL PAT report 13.6% CAGR during FY2016-18E, to Rs915cr. Attractive Valuation: In the backdrop of strong surge in profitability, ITNL stock price looks very attractive from valuation point of view. ITNL stock (on consol. basis) is trading at FY2018E P/E and P/BV multiple of 8.7x and 0.4x, respectively. Alternatively, we value construction business at EV/EBITDA of 5x FY2018E EBITDA and domestic Road BOT projects on FCFE basis at Cost of Equity of 14%. Also, we value Elsamex, YuHe Expressway, Metro and other Infra Projects (other than road projects) using Investment multiple. On adding up all the projects’ value, we arrive at SOTP-based target price of Rs93. Given the strong case of improvement in business outlook, we maintain BUY rating on the stock.

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CMP 79
Target Price 93
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others14.0
Grand Total100.0

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