IRB Infrastructure Developers is a small-cap stock with a market capitalization of over ₹14,255.1 crore. The company is engaged in highway construction and it is one of the leading infrastructure development companies in India in the road and highway sector.
On Monday, the shares of IRB Infra zoomed over 11% intraday after the company said it executed a definitive agreement about the implementation of the Ganga Expressway project. The stock also got push after domestic brokerage firm Ventura Securities stated in a research report dated October 14 that the stock has the potential to move higher from this point.
According to the projections made by the analysts at Ventura Securities, the stock has the potential to reach a new high of ₹729.2/share over the next 30 months, representing an upside of 239% from the stock's Friday closing price. In the bull case scenario, IRB Infra's stock price is projected to scale to ₹881/share, an upside of nearly 307%. In the bear-case scenario, the stock price of IRB is expected to rise 137.5% to ₹513.1/share.
IRB Infrastructure Developers Ltd (IRB) has historically underperformed the broader market as investors feared that the management strategy of mostly undertaking BOT projects could lead to stress on the balance sheet. However, the management has strategically deleveraged its balance sheet through InvITs; a private InvIT in partnership with marque investor GIC (IRB stake at 51%), capital raise of ₹5,347 crore through preferential allotment to Cintra for 24.9% stake (a subsidiary of Ferrovial) and GIC for 16.9% stake; and a public InvIT (16% stake with IRB), said Ventura Securities.
The brokerage expects the revenue of the IRB to grow at a CAGR of 14.7% over FY22–25 to ₹9,602.1 crore in FY25. And it expects overall blended margins to be a tad lower than FY22 levels.
The financing costs of the company are expected to fall by 9.8% CAGR as the brokerage expects the total debt to decrease from ₹13,822.5 crore in FY22 to ₹13,232.1 crore in FY25. The brokerage anticipates an improvement in net debt/equity and net debt/EBITDA from 0.9x and 3.5x in FY22 to 0.4x and 1.3x in FY25. Net earnings are expected to grow at 64.0% CAGR over FY22-FY25, from ₹361.2 crore in FY22 to ₹1,592.8 crore in FY25.
The return ratios, including the RoE, RoCE, and RoIC, are expected to improve by 697, 300, and 680 (bps) over FY22–25 to 9.8%, 15.6%, and 20.5% in FY25, according to the brokerage calculations.
The government of India has given a massive push to the infrastructure sector, which can be seen from the fact that the total budgetary outlay increased by 68.6%, from ₹1,18,101 crore in FY22 to ₹1,99,107 crore in FY23, which bodes well for the company going forward.
In Q1FY23, the consolidated net profit of IRB Infra jumped to ₹363.2 crore from ₹71.9 crore in the same quarter of the previous fiscal. Total consolidated income during the quarter rose to ₹1,995.40 crore as against ₹1,670.48 crore in the year-ago period. Total expenditure declined to ₹863.9 crore during the June quarter, compared to ₹925.8 crore earlier.
Meanwhile, the stock increased by almost 11% over the previous week. From its mid-June low of ₹180.70, it rose to ₹237.50, generating a return of 31.43%. In the last three years, the stock has given a multi-bagger return of 251%.
With a 48.7% stake, foreign investors control the majority of the company, followed by the promoters with a 34.2% stake, and general shareholders hold a 10.6% stake in the company.
An average of 08 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.