ILandFS TRANSPORT : Accumulate on every dip

Scrip Code: 533177 / ILFSTRANS

CMP:  Rs. 244.95; Buy at Rs.235 - 240.
Price Target: Rs. 300.00.
Market Cap: Rs. 4,745.96 Cr.
52 Week High/Low: Rs. 367.80 / Rs. 172.00

Total Shares: 19,42,67,732 shares; Promoters : 14,58,67,769 shares – 75.09 %; Total Public holding : 4,83,99,963 shares – 24.91 %;

Book Value: Rs. 81.11; Face Value: Rs. 10.00; EPS: Rs. 16.4; Div: 30 %.

P/E: 14.93 times; Ind P/E: 14.57; EV/EBITDA: 9.69
Total Debt: Rs. 1,525.00 Cr; Enterprise Value: Rs. 6,270.96 Cr

Fair Value: Rs.300.

IL&FS Transportation Networks Limited engages in the development, implementation, operation, and maintenance of surface transport infrastructure projects in India & internationally. Company constructs and operates national and state highways, roads, flyovers, and bridges under the Build, Operate, and Transfer (BOT) basis. It also provides maintenance services primarily for highways and roads in Spain, Portugal, and Latin America; advisory and project management for BOT road projects; trades in materials used in the maintenance of roads; and undertakes construction contracts. ITNL was formerly known as Consolidated Transportation Networks Limited and changed its name to IL&FS Transportation Networks Limited in September 2005. The company was incorporated in 2000 and is based in Mumbai, India. IL&FS Transportation Networks Limited is a subsidiary of Infrastructure Leasing & Financial Services Limited.

Projects

ILFSTRANS has Rs 13,460 Cr worth of project capital works remaining to be executed in over the period of 3-4 years. ILFSTRANS receives 10% of total project cost (TPC) as upfront charges and further 5%-8% as consulting charges from its subsidiaries. Further, the team of 120 engineers in the company designs supervises and out sources construction work to local subcontractors. This model allows it to focus on the core activities which optimizes leverage and maximizes the returns on assets and return on net worth.
ILFSTRANS collects Rs. 52 lakhs average toll per day from 5 operational road projects which is expected to increase by 9.8x up to Rs 5.12 crore per day by FY14E primarily led by functioning of 10 new road projects. The increase in toll revenue by 9.8x will leave enough free cash flow in the system.

National Highway Authority of India (NHAI) has planned to award 100 road projects of 7000 km to be awarded in current financial year. ILFSTRANS maintained 9% market share in FY10 and it is believed that it will be a natural beneficiary to grab these opportunities.

Valuation

Valuation of ILFSTRANS on a SOTP method comes to Rs. 326. The value on   standalone basis, in which the company derives its revenues from advisory fees and EPC work comes at Rs. 98 based on the 5x its FY11E EPS of Rs 19.6. It is assumed that the cost of equity of 13% for toll & 12.5% for annuity projects which brings the valuation of existing BOT projects of ILFSTRANS at Rs 183.4, investment at Rs 19, Elsamex at Rs 19/share and ILFSTRANS’s stake in Noida Toll Bridge at Rs 6.7/ share.

KEY FINANCIALS	2010	2011E	2012E	2013E
SALES (Rs. crs)	2,403	3,741	6,277	7,906
NET PROFIT (Rs. crs)	335	442	546	655
EPS (Rs.)	14.6	19.3	23.8	28.6
PE (x)	20.0	15.2	12.3	10.3
P/BV (x)	3.9	3.1	2.7	2.2
RoE (%)	19.7	20.4	21.9	21.7
RoCE (%)	14.4	13.3	12.9	12.6

I maintain my accumulation status on ILFSTRANS with the price target of Rs. 255 in short term. As I always say do respect the market and keep a strict stop loss of 8 % on your every purchase.