I had written a report on IRB Infra. Developers Ltd about 2 years ago. Here is the link to it. I would like everyone to see the progress made by IRB Infra over the last 8-10 quarters to get an idea of it's business performance and the corresponding changes in it's valuations.
First have a look at the following chart which shows the Trailing-Twelve-Months progress of IRB's Total Income and EBITDA:
The last time I had written about IRB Infra, it's T-T-M Total Income stood at Rs.4061 crores. In the last 2 years, it has increased by about 56% to reach Rs.6291 crores. IRB's EBITDA has increased by about 35% during the same period. This reflects a slight tapering of EBITDA margins, mainly because of many new large Highway projects were commissioned in the recent quarters and any new project delivers lower EBITDA margin in the initial couple of years. Still the business growth is strong and expected to maintain a healthy double-digit growth momentum going forward as well.
Now let's look at IRB's Earnings Per Share (EPS). I have considered EPS numbers instead of Net Profit numbers, mainly because there was some Equity Dilution done by the company in the year 2015, which affects the EPS. Hence it's better to check the EPS growth.
Between June'15 and June'17, IRB's T-T-M EPS has improved from Rs.15.9 to Rs.21.9, which is a 38% jump in the last 2 years. About 40% of IRB's EBITDA goes towards Interest Costs. With improving Cash Flows from commissioned projects and fresh borrowings at lower rate of interest, we can expect the Interest Cost as a Percentage of EBITDA to gradually go down. This will help improve IRB's Net Profit margin in future quarters.
IRB has been a consistent Dividend payer. It usually pays about 25% of it's EPS as Dividend every year. With increasing EPS, we can expect the company to maintain or enhance the 25% Dividend distribution policy.
Now let's look at IRB's share price movement over the last 2 years:
As you can see, IRB's share price has clearly not reflected the company's strong business growth. It has spent almost all it's time trading in a range of Rs.200 to Rs.270. At the current price of about Rs.210, IRB's share price is available at less than 10 times it's T-T-M EPS. This is extremely low valuations for a company which is managing to grow at healthy double-digit growth rates and is also a consistent Dividend payer. And it's business has good long term visibility as India will continue to need more & more Highways for a long time to come. Most of the B-O-T contracts that IRB has in it's bag are for a 15 to 20 years duration, where the initial 2 years are allocated for construction of the Highway and then Toll Collection and Maintenance of the Highway for the remaining period.
I think that IRB Infra Developers Ltd is a potential multibagger over the long term. Anybody with a long term horizon can invest in it and enjoy the Dividends until the share price starts moving in the direction of business performance.
First have a look at the following chart which shows the Trailing-Twelve-Months progress of IRB's Total Income and EBITDA:
Now let's look at IRB's Earnings Per Share (EPS). I have considered EPS numbers instead of Net Profit numbers, mainly because there was some Equity Dilution done by the company in the year 2015, which affects the EPS. Hence it's better to check the EPS growth.
IRB has been a consistent Dividend payer. It usually pays about 25% of it's EPS as Dividend every year. With increasing EPS, we can expect the company to maintain or enhance the 25% Dividend distribution policy.
Now let's look at IRB's share price movement over the last 2 years:
As you can see, IRB's share price has clearly not reflected the company's strong business growth. It has spent almost all it's time trading in a range of Rs.200 to Rs.270. At the current price of about Rs.210, IRB's share price is available at less than 10 times it's T-T-M EPS. This is extremely low valuations for a company which is managing to grow at healthy double-digit growth rates and is also a consistent Dividend payer. And it's business has good long term visibility as India will continue to need more & more Highways for a long time to come. Most of the B-O-T contracts that IRB has in it's bag are for a 15 to 20 years duration, where the initial 2 years are allocated for construction of the Highway and then Toll Collection and Maintenance of the Highway for the remaining period.
I think that IRB Infra Developers Ltd is a potential multibagger over the long term. Anybody with a long term horizon can invest in it and enjoy the Dividends until the share price starts moving in the direction of business performance.
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