IRCON Latest Result Analysis & Implications

IRCON - Q1 FY21 (Unaudited – Cons.)

CMP: 96

Total Income at 549.2 Cr 

1,128 Cr (-51.37%)  YoY | 1,897 Cr (-71.01%) QoQ 

Year ending revenue: 5,540 Cr Vs. 4,798 Cr (15.41%)

Net Profit of 34.5 Cr 

144.7 Cr (-76.31%) YoY 115.4 Cr (-70.43%) QoQ 

Year ending Net profit: 485 Cr Vs. 450 Cr (-7.74%)

EPS (in Rs.) 0.73

3.08 YoY | 2.45 QoQ 

Year ending EPS: 10.32 Vs. 9.57

View: Result is in line with the expectation. YoY and QoQ revenue down and profit also significantly down.  Other Income impact also in profit & loss as in this quarter other income recorded at INR 22.4 Cr Vs. 58 Cr in corresponding previous quarter. 

Business Updates & Highlights:

Q1FY21 cons EBITDA was around INR 59.8 Cr Vs. 175.7 Cr in Q1FY20 Vs. 154.9 Cr in Q4FY20 therefore declined by 66.4% in YoY and 66.1% in QoQ.  EBITDA margin in Q1FY21 was 11.3% Vs. 16.4% in Q1FY20 VS. 8.1% in Q4FY20.

Domestic business revenue in Q1FY21 was around INR 440.7 Cr Vs. 973.7 Cr in Q1FY20 Vs. 1,758 Cr in Q4FY20 therefore declined by 54.8% in YoY and 74.9% in QoQ.

International business revenue in Q1FY21 was around INR 86.1 Cr Vs. 96.3 Cr in Q1FY20 Vs. 114.9 Cr in Q4FY20 therefore declined by 10.8% in YoY and 25.2% in QoQ.

Financial

ROE and ROCE is around 12% and 11% respectively and book value per share is around INR 89 and share is currently trading at 1.01x of its book value. Company is currently trading at annualized PE of around 12 which is good as per Industry benchmark. Promoter (Govt of India) holding in the company is around 89.2% which is too strong.  FIIs and mutual hold around 0.2% and 0.2% respectively. 

Position: Share strong support price is INR 84. Long term investor should continue with the company.  

Share View: Share price high 115 (52 week) and now 96. Ircon International Limited is a Miniratna (Category - I) Schedule A Public Sector Enterprise and a leading turnkey Construction Company in the public sector known for quality, commitment and consistency in terms of performance. The core competence of IRCON is in Railways, Highways & Extra High Tension substation engineering and Construction. The company has executed projects operated in the areas of Railway construction including ballast less track, electrification, tunneling, signal & telecommunication as well as leasing of locos, construction of roads, highways, commercial, industrial & residential buildings and complexes, airport runway and hangars, metro and mass rapid transit system, etc.  

Opportunities

The Company caters to both domestic as well as international markets and receives orders both on tender basis as well as nomination basis. Majority of orders from railways are received on nomination basis and for other sectors are on tender basis. Company has healthy order book. The company’s client list is dominated by central and state government undertakings such as Northern Railways, Ministry of Railways, Delhi Metro Rail Corporation Ltd, etc. which mitigates the counter party risk to a large extent. Company has good dividend paid to their shareholders as well and it may continue to upcoming years as well. IRCON has widespread operations in several states in India and other countries (Malaysia, Nepal, Bangladesh, South Africa, Algeria and Sri Lanka). Company has completed more than 128 projects in 25 countries across the globe and 390 projects in various states in India. India has a requirement of investment of Rs.50 trillion in infrastructure by 2022 to have sustainable development in the country. Only 24% of National Highway network in India is four-lane, therefore there is an immense scope. Also, removals of execution hurdles with faster clearances are expected to benefit the sector, going forward. Further, strong thrust of the government towards development of railways is expected to result in increased opportunities for the companies engaged in railways construction segment.

Risk

The Company is exposed to the risk of executing international projects especially in the difficult terrains and territories. Single digit growth in revenue and negative growth in profit for last 5 years. The Company's/Group's revenue from operations for the quarter has reduced substantially due to nationwide lockdown imposed to contain the spread ofCovid-19. This may impact in Q2 and Q3 as well. 

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