IRB Infra shares: Ventura says 'Buy', sees stock doubling in 24 months
IRB Infra shares: Ventura says ‘Buy’, sees stock doubling in 24 months
IRB Infrastructure Developers Ltd (IRB Infra) is off 12 per cent from its 52-week high of Rs 71.95, yet the stock is up 150 per cent for the one year-period. If one goes by what Ventura Securities say, the scrip has potential to double investor money within 24 months.
Ventura said the recent downturn on the counter was solely a result of the broader market correction affecting midcap stocks, and that IRB possesses considerable growth potential stemming from its increased number of free cash flow generating projects.
“Our conviction in the growth story is further emboldened by the fact that
Cintra (an affiliate of Ferrovial) is looking to acquire a shareholding of 24 per cent in IRB Infrastructure Trust from GIC. The valuation exercise undertaken for this transfer values the initial 10 projects of IRBTrust at Rs 19,000 crore. This raises the value of IRB’s share of 51 per cent to Rs 9700 crore for 10 assets,” it said.
In addition, Ventura noted that IRB Infra has submitted claims to the NHAI concerning the Ahmedabad-Vadodara project for claim of competing road. The order has been reserved and awaiting final clearance from regulatory bodies.
“These claims have not been factored into our forecasts and represent an upside risk to our estimates,” it said.
IRB Infra shares settled at Rs 63.50 on Wednesday. Ventura’s target price on the stock at Rs 134 suggests a potential 105 per cent upside on IRB Infra over this price in 24 months.
“We are re-initiating our coverage on IRB and with a BUY for a SOTP based price target of Rs 134 per share based on an FY27 EV/EBITDA multiple of 16X. This is conservatively lower than the 21 times EV/Ebitda valuation as upraised in the Cintra-GIC transaction,” it said.
Ventura estimates IRB’s revenue, Ebitda and net earnings to grow at a CAGR of 12.5 per cent, 11.1 per cent and 25.7 per cent, respectively. The company’s net margins are expected to improve 1469 basis points to 17 per cent by FY27E.
Consequently, the company’s return on equity (RoE) is expected to reach 9.8 per cent, and the RoIC is expected to rise 636 bps to reach 10.9 per cent by FY27E, Ventura said.
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