CMP:
Rs. 128.70; Buy at current levels & Accumulate at every dips.
Short term Target: Rs. 143.00, 6 month Target – Rs. 220; STOP LOSS – Rs. 118.40; Market
Cap: Rs. 2,500.64 cr; 52 Week High/Low: Rs. 228.90 / Rs. 97.10
Total
Shares: 19,42,67,732 shares; Promoters : 14,07,63,003 shares –72.46 %; Total
Public holding : 5,35,04,729 shares – 27.54 %; Book Value: Rs. 109.38; Face Value: Rs. 10.00; EPS: Rs.
12.54; Div: 40.00 % ; P/E: 10.26 times; Ind. P/E: 17.57; EV/EBITDA: 7.99.
Total
Debt: 2,753.38 Cr; Enterprise Value: Rs. 16,467.57 Cr.
IL&FS TRANSPORTATION NETWORKS LIMITED: ITNL was incorporated on
November 29, 2000 and is based in Mumbai, India. It was formerly known as
Consolidated Toll Network Limited and changed its name to IL&FS
Transportation Networks Limited in October 18, 2005. IL&FS Transportation
Networks Limited operates in the Highway and street construction sector. The
company came with an IPO on March 11, 2010 with an issue price of Rs. 258 per
share and raise about Rs. 700 Cr with an objective to utilize the proceeds for
funding pre-payment of company’s debt and for other general corporate purposes.
The shares got listed on Indian brouses on March 30, 2010. IL&FS
Transportation Networks (ITNL) is a surface transportation infrastructure
company. ITNL is the builder, operator and transfer (BOT) road operators
engaged in developing, designing, operating, maintaining and facilitating
surface transportation infrastructure projects. ITNL’s services include
advisory and management services, supervisory services, operation and
maintenance services, toll collection services for toll road projects. ITNL
provides maintenance services primarily for highways and roads in Spain,
Portugal and Latin America, and advisory and project management for BOT road
projects, trades in materials used in the maintenance of roads & undertakes
construction contracts. On May 31, 2010, it
acquired Area De Servicio Coiros S.L.U. On September 1, 2010, it acquired
Conservacion De Infraestructuras De Mexico S.A. De C.V. On December 17, 2010,
it acquired Alcantarilla Fotovoltaica, S.L.U. and Area De Servicio Punta
Umbria, S.L.U. IL&FS Transportation Networks
Limited is a subsidiary of Infrastructure Leasing & Financial Services
Limited. The company is locally compared with Simplex Infrastructures
Ltd, Jaypee Infratech Limited, Ashoka Buildcon, Irb Infrastructure developers
Limited and globally compared with DP World Ltd (Dubai Ports World) of Dubai,
Gemadept Corporation of Vietnam, Kuwait and Gulf Link Transport Company of
Kuwait, Summit Alliance Port ltd of Bangladesh and NRW Holdings Limited of
Australia.
Investment Rationale:
IL&FS
Transportation Networks Ltd. (ITNL) is an established ISO 9000:2001 surface
transportation infrastructure company & is one of the largest private
sector Built Operate Transfer road operators in India. It has established its self as a developer,
operator and facilitator of surface transportation infrastructure projects,
taking projects from conceptualization through commissioning to operations and
maintenance. IL&FS Transportation Network limited is India’s largest road
developer. ITNL is from the reputed IL&FS Group, with a portfolio of 22 domestic road
projects and 1 international projects aggregating to 7,621 Stake Adjusted Lane
in Km (SALK) in its portfolio. ITNL has 11 operational projects with 3,281 SALK
and remaining 12 projects or 4,341 SALK under development. In March 2008, IL&FS
Transport Networks Ltd commenced international operations through the
acquisition of Elsamex S.A. (Elsamex), is a provider of maintenance services
primarily for highways and roads in Spain & other countries. IL&FS Transportation Networks Ltd has recently
signed a US$ 30 Cr contract to build a six-lane highway. The project will link
an eastern industrial zone having heavy-duty traffic to mining districts such as
Dhanbad, the nation's coal capital. Meanwhile, NHAI has agreed to facilitate 50
% of the financial assistance to Kerala’s State Government for developing the proposed
bypasses in Kollam, Alappuzha and Kozhikode. The Union ministry will grant Rs. 357
crore of financial assistance to the state for developing the five bypass
roads. The funds for the same would be disbursed in a phased manner. IL&FS
Transportation Networks has signed a MoU with Nippon Expressway Company Ltd
(NEXCO East) to work together through a strategic alliance for implementation
of PPP road projects. During the quarter, Barwa Adda Expressway Ltd and Khed Sinnar
Expressway Ltd have been incorporated as subsidiaries of the company National
Highways Authority of India has issued Provisional Completion Certificate to
the Pune-Solapur Road project which was awarded to the Company on DBFOT (Toll)
basis. The project is on toll basis with a concession period of 19 years and
295 days comprising of Tolling and Operations & Management period of 18
years. IL&FS Transportation Networks Ltd has informed that The Concession
Agreements were signed with the concerned Authorities for the following
projects: Kiratpur Ner Chowk section of NH 21 of 90.175 kms in the States of
Punjab and Himachal Pradesh; Beawar Gomti section of NH 8 of 88 kms of the
total 116 kms Capacity augmentation in the State of Rajasthan; Sikar Bikaner section of NH 11 of 237.57
kms in the State of Rajasthan. During the year 2012-13, the group has acquired
an additional 38,60,456 equity shares of one of the subsidiaries, viz., North
Karnataka Expressway Ltd (NKEL), as result of which the stake of the Group in
NKEL has been increased from 87.00% to 93.50%. IL&FS Transportation
Networks Ltd has reported its first quarter fiscal 2014 consolidated revenue of
Rs. 1,451.11 Cr, a decrease of 8.13 % y-o-y. The company’s net profit jumps to Rs.
124.53 Cr against Rs. 121.72 Cr in the corresponding quarter ending of previous
year, an increase of 2.31 %. During the quarter total expenditure declines by
16 % mainly on account of decrease in material consumed cost along with
consideration of construction contract expenses. Total expenditure in Q1 FY14
was at Rs. 956.75 Cr as against Rs. 1,137.48 Cr in Q1 FY13. The Company has undertaken
international initiatives and has established offices in Dubai and Nigeria
through one of its subsidiary based in Singapore. The International office is based
out of Dubai & will be responsible for pursuing international mandates. The
Company is pursuing in UAE, Nigeria and others parts of the world. The Company
is also pursuing an airport expansion project in the UAE. The Company’s Metro
Rail project in Gurgaon is nearing completion and is scheduled to commence
operations in the coming year.
Outlook and Valuation:
 |
Gurgaon Toll Plaza
|
IL&FS Transportation Networks Ltd has been adjudged and awarded the "Most
Admired Infrastructure Company in Transport" at the 5 KPMG
INFRASTRUCTURE AWARDS 2013. India’s road network, spanning across 4.69 million km, is the
third-largest road network in the world, next in line only to the US and China.
The country relies heavily on its robust road network that carries almost 65
per cent of freight and 80 per cent of passenger traffic. National Highways
(NH), under the jurisdiction of National Highways Authority of India (NHAI),
constitute for almost 2 per cent of the network but carry about 40 per cent of
the total road traffic. The Indian Government is very particular about the
development and maintenance of this huge network; more so because number of
vehicles in the country has been growing at an average rate of 10.16 per cent
per annum over the last five years. Thus a need for efficient and world-class
road network becomes inevitable for smooth transitions of goods and services. The
administration awarded about 2, 000 km worth of new road construction contracts
in FY13. The Company continues to maintain its growth story and
the leading position in the Surface Transport Sector with 25 projects in its
portfolio in various stages aggregating to 13,161 lane kilometers, of which
6,318 lane kilometers are under operation. ITNL is highly sensitive to interest rate, 100 basis
points correction in the risk free interest rate leads to 26 % increase in fair
value of ITNL, & this remains a key beneficiary of reduction in risk free
rate of project financing. ITNL has the highest leverage in the road sectors
making it highly interest rate sensitive. At
the current market price of Rs. 128.70, the stock is trading at a PE of 5.74 x
FY14E and 6.91 x FY15E respectively. The company can post Earnings per share
(EPS) of Rs. 22.40 in FY14E and Rs. 18.60 in FY15E. One can buy ITNL with a short term target price of Rs. 143.00 for Medium to Long term investment and for the SHORT
TERM PLAYERS it should be Rs. 220.00
| KEY FINANCIALS | FY12 | FY13 | FY14E | FY15E |
|---|
| SALES (₹ Crs) | 5,605.60 | 6,644.90 | 5,972.50 | 7,575.00 |
| NET PROFIT (₹ Cr) | 497.00 | 519.40 | 434.80 | 361.40 |
| EPS (₹) | 25.60 | 26.70 | 22.40 | 18.60 |
| PE (x) | 4.70 | 4.50 | 5.40 | 6.40 |
| P/BV (x) | 0.90 | 0.60 | 0.60 | 0.50 |
| EV/EBITDA (x) | 8.40 | 8.90 | 8.70 | 8.40 |
| ROE (%) | 20.20 | 16.40 | 11.40 | 8.60 |
| ROCE (%) | 14.00 | 11.80 | 10.50 | 10.90 |
I would buy IL&FS TRANSPORTATION NETWORKS LTD for Short term it would be Rs. 143.00 and for the Medium to Long term it would be Rs. 220. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or ₹ 118.40 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here
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