IVRCL

IVRCL: The strong business momentum of IVRCL is expected to be driven by an order backlog of Rs.110bn which is 4.75x FY07 sales. Water continues to dominate the revenue of the company which is closely followed by building and industrial infrastructure space. Water and environment forms the lions share at 59.1% followed by building and industrial infrastructure at 18.2%, transportation at 13.6% and power & distribution at 9.1%. IVRCL has reported strong growth in its topline and bottom line for the past few years. Income grew at a CAGR of 43.9% during FY2004-2007 and stood at Rs.23.13bn at the end of Mar 31, 2007. During the same period, cost of construction expenses grew at a CAGR of 42.4% to Rs.19.5bn in FY07. This resulted in PBT and PAT growing at a CAGR of 76.1% and 53.4% to Rs.1.85bn and Rs.1.41bn respectively during the same period. IVRCL recorded revenue of Rs.23.44bn for the nine months ended December 31, 2007 as compared to Rs.13.22bn during the same period last year representing robust growth of 78.2%. Operating margins of the company stood at 9.82% for the first nine months of 2008 and was lower as compared to 9.92% recorded for 9MFY2007 due to increase in raw material prices of various inputs like cement and steel. We initiate our coverage of IVRCL with a Buy rating and value IVRCL’s share at an intrinsic value of Rs.470.06 based on Sum of the Parts valuation method. The intrinsic value is higher than the current market price of Rs.413.5 (as on April 28, 2008) by 13.68%.