Stock Review: IL&FS Transportation

Ever since the company went public, I have been holding my positive view for it. At that point of time, they issued the share at Rs 258. They have about 22 road projects of which 50% are on BoT and toll based, and 50% are on annuity based. They have a diversified mix. They are not depending purely either on the toll or annuity.

 

Apart from that, 70% of their orders come from NHAI. They are not much dependent on the state highways or state contracts where one could see a lot of difficulties and lower margin because of the stiff competition by the local players.

 

If we go by the financial performance, the company has an order book of close to Rs 12000 crore of the projects under implementation. Out of the 22 road projects, some of them are operational.

They have posted an EPS of Rs 14 on topline of about Rs 2400 crore as the financial performance for nine months. FY11 is likely to give an EPS of close to Rs 19. I am quite positive for FY12 going forward. I won't be surprising to see an EPS of close to about Rs 23-24. If it is multiplied with the current price, it will rules at a PE multiple of 10.

 

When we compare it with any comparable peer like Gammon Infra or IRB Infra, they have better portfolio of road projects and one would have comfort on the promoters also. Going by all these things, the downside is very minimal, but on the upside, it could be a portfolio stock with an expected return of close to 20% on an annualised basis.

 

Keeping a view of two-three years on the stock, there wouldn't be any risk in holding the stock even from a longer-term point of view.