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IVRCL: Healthy order pipeline - Views on News from Equitymaster

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IVRCL: Healthy order pipeline
Mar 1, 2012

IVRCL Infrastructures has announced the third quarter results of financial year 2011-2012 (3QFY12). While total income declined 15.2% YoY bottom line registered a fall of 84.0% YoY during the quarter. Here is our analysis of the results.

Performance summary
  • Total income declined by 15.2% YoY during 3QFY12 due to the prevailing execution issues.
  • Operating profits declined 32.5% YoY in 3QFY12 due to poor performance at the top line front and rising input cost. The company reported operating margins of 7.9% in 3QFY12 compared to 9.9% in 3QFY11.
  • Net profits declined 84.0% YoY in 3QFY12 due to muted performance at the operating level and increase in interest and depreciation expenses.
  • The current order book of the company stands at approximately Rs 250 bn. It received orders worth 106.7 bn during 9MFY12. The full year guidance for order intake is Rs 140 bn.


Standalone financial snapshot
(Rs m) 3QFY11 3QFY12 Change 9MFY11 9MFY12 Change
Income from operations 14,091 11,955 -15.2% 35,653 33,635 -5.7%
Other operating income 84 70 -16.5% 334 94 -71.8%
Total income 14,175 12,025 -15.2% 35,988 33,729 -6.3%
Expenditure 12,770 11,077 -13.3% 32,613 30,988 -5.0%
Operating profit (EBDITA) 1,405 948 -32.5% 3,375 2,741 -18.8%
Operating profit margin (%) 9.9% 7.9%   9.4% 8.1%  
Other income 10 10 -0.5% 67 112 67.8%
Interest 592 661 11.6% 1525 1,941 27.3%
Depreciation 199 229 15.0% 540 706 30.6%
Profit before tax 625 69 -89.0% 1,376 206 -85.0%
Tax 202 1 -99.7% 440 15 -96.7%
Profit after tax/(loss) 423 68 -84.0% 936 191 -79.6%
Net profit margin (%) 3.0% 0.6%   2.6% 0.6%  
No. of shares (m)         267.0  
Basic earnings per share (Rs)         0.72  
P/E ratio (x) *         17.9  
* On a trailing 12-months basis

What has driven performance in 3QFY12?
  • IVRCL's top line declined 15.2% YoY during 3QFY12. Poor execution amidst the ongoing environmental issues impacted top-line growth.

  • Operating profits declined 32.5% YoY due to poor performance at the top-line level and rising input cost. The overall expenditure of the company increased from 90.1% (as a percentage of sales) in 3QFY11 to 92.1% in 3QFY12.

  • The net profits of the company declined 84.0% YoY due to muted performance at the operating level and increase in interest and depreciation expenses during the quarter. However, the tax rate declined from 32.3% in 3QFY11 to 0.9% in 3QFY12 due to deferred tax adjustments.

What to expect?
Execution issues continue to plague the top-line growth of IVRCL. Environmental and legal issues have impacted the project execution cycle of the company while the bottom line is impacted by rising interest (increase in debt) and depreciation expenses. However, the company has a healthy order book to the tune of Rs 250 bn which provides strong revenue visibility into the future. Nonetheless, considering the current execution issues and higher interest rate environment we maintain our "Hold" view on the stock.

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