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Ivrcl Infrastructures

Robust order book and order inflow expected
IVRCL has a robust order book of Rs.140bn which provides a revenue visibility for next 2.5 years. Order book of Rs.140 bn provides diversification across water and irrigation projects (68%), buildings (20%), power (7%) and transportation (5%). IVRCL is carrying out the building projects primarily for the large developers and
state government where risk of delayed payments is minimal. Order inflow in the current fiscal till date has also been to the tune of Rs 67bn and company is L1 in
another Rs 20bn worth of orders across segments.

Decline in commodity prices to augur well for the company.
Commodity prices have come off quite sharply in past few months which are expected to augur well for the company as well as for the entire sector. Out of the total order book, 92-93% is hedged with variable pricing clauses while the remaining are fixed price contracts. Star rated contracts constitute 70% of the variable pricing contracts while remaining contracts are linked to either WPI or other benchmark index. Though variable pricing clauses hedge the company against raw material price increases, but we believe that by Q4FY09, impact of lower raw material prices will start reflecting in the proportion of fixed price contracts in the order book.

Financial outlook
With a robust order book and expected order inflows, we maintain our revenue
estimates and expect revenues to grow at a CAGR of 31% between FY08-FY10.At current price of Rs.160, stock is trading at 9.7x and 7.8x its P/E multiples on FY09 and FY10estimates respectively. The company is expected to benefit from increased order inflows in the coming months as well as decline in the lending rates. BUY on IVRCL with a price target of Rs 241 on FY10 estimates arrived through sum-of-the-parts methodology.