IVRCL - target price of Rs570

IVRCL Infrastructure—expect moderation in execution in 4QFY08 after >70%
growth in 9mFY08, marginally revise estimates, maintain BUY
We expect IVRCL to report revenues of Rs13.6, a yoy growth of 37% versus 9MFY08
growth of over 78%. We believe that yoy growth in 4QFY08 is likely to be lower led by
(1) more even spread of revenues and (2) base effects with very strong yoy growth in
4QFY07 also.
We have revised our execution estimates for FY2009E and FY2010E to Rs50.4 bn and
Rs69.5 bn from Rs49 bn and Rs70.7 bn earlier, based on more even distribution of
execution growth. We have revised our EPS estimate for FY2009E and FY2010E to
Rs20.6 and Rs27.4 from Rs20.4 and Rs31.4 earlier. We expect flat margins in FY2009E
and FY2010E of 10.3%. We maintain our target price of Rs570 comprised of (1) Rs413
for the core construction business, (2) Rs112 for IVR Prime, (3) Rs15 for Hindustan Dorr
Oliver and (4) Rs39 for BOTs and infrastructure holdings (Exhibit 6). Our valuation of
core construction business implies 14X FY2010E earnings (Exhibit 7). We highlight that
IVRCL had a visibility of 2.6 years at the end of 9mFY08 based on forward four quarter
revenues (Exhibits 6, 7 and 8).