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CMP 380.00
Target Price 425.00
ISIN: INE036A01016
SEPTEMBER 17th
2013
RELIANCE INFRASTRUCTURE LIMITED Result Update: Q1 FY14
BUYBUYBUYBUY
Index Details
Stock Data
Sector Infrastructure
BSE Code 500390
Face Value 10.00
52wk. High / Low (Rs.) 572.35/308.00
Volume (2wk. Avg.) 550000
Market Cap (Rs. in mn.) 99951.40
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY13A FY14E FY15E
Net Sales 223815.50 243958.90 261036.02
EBITDA 40170.70 47949.28 52383.80
Net Profit 22468.30 22755.37 24260.16
EPS 85.42 86.51 92.23
P/E 4.45 4.39 4.12
Shareholding Pattern (%)
1 Year Comparative Graph
RELIANCE INFRASTRUCTURE LTD S&P BSE SENSEX
SYNOPSIS
Reliance Infrastructure Limited (RInfra) is India's
largest infrastructure company and leading utility
company having presence in power business i.e.
Generation, Transmission, Distribution, EPC and
Trading.
The consolidated net profit slightly increased to Rs.
4152.00 mn against Rs. 4119.70 mn in the
corresponding quarter ending of previous year, an
increase of 0.78%.
Revenue for the quarter rose by 1.29% to Rs.
54524.50 mn from Rs. 53830.80 mn, when
compared with the prior year period.
EBITDA is increased by 2.83% to Rs. 10171.90 mn
against Rs. 9891.70 mn in the corresponding period
of previous year.
RInfra has been allowed to recover past arrears,
along with 14.5% per annum carrying cost, at Rs.
925 crore per year, aggregating to Rs. 5,550 crore
over the next 6 years.
During the quarter, the Company’s ninth road
project i.e. Jaipur to Reengus in Rajasthan has been
completed and toll collection has started.
During the quarter, RInfra’s EPC business revenue
of Rs. 16696.60 mn and Order book of Rs. 88900 mn
as on June 30, 2013.
Net Sales and PAT of the company are expected to
grow at a CAGR of 3% and 19% over 2012 to 2015E
respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Reliance Infrastructure Ltd 380.00 99951.40 85.42 4.45 0.38 74.00
Power Grid Corporation of India Ltd 101.55 470148.60 9.51 10.68 1.93 21.10
GMR Infrastructure Ltd 19.30 75396.50 0.13 149.00 1.04 0.00
NTPC Ltd 140.40 1157663.20 15.34 9.15 1.58 40.00
Recommendation & Analysis - ‘BUY’
Reliance Infrastructure Ltd has reported a total Operating Income of Rs. 54524.50 mn (US$ 918 million), against
Rs. 53830.80 mn in the corresponding quarter of previous year. During the quarter, net profit of Rs. 4152 mn
(US$ 70 million) as against Rs. 4119.70 mn in the corresponding quarter of previous year. During the quarter, the
Cash Profit of Rs. 5730 mn (US$ 96 million), against Rs. 5530 mn in the previous year. The Company is
conservatively financed with debt to equity ratio of 0.92 as on June 30, 2013. The Company was generated 1,311
million units and it has traded 1,281 million units in Q1 FY14; amongst top 5 trading licensee in the country.
During the quarter, RInfra’s EPC business revenue of Rs. 16696.60 mn and Order book of Rs. 88900 mn as on
June 30, 2013. The Company Infrastructure segment has reported revenue of Rs. 1796.70 mn in Q1 FY14 an
increase of 83% over previous year. The revenue from Electricity business was Rs. 36031.20 mn in Q1 FY14. The
Company’s ninth road project i.e. Jaipur to Reengus in Rajasthan has been completed and toll collection has
started. MERC has order that RInfra has been allowed to recover past arrears, along with 14.5% per annum
carrying cost, at Rs. 925 crore per year, aggregating to Rs. 5,550 crore over the next 6 years. RInfra has a
capability to show sustainable cashflow from regulated electrical and strong growth potential infra businesses.
We expect the company to post a CAGR of 3% and 19% in its top-line and bottom-line respectively. Hence, we
recommend ‘BUY’ for ‘Reliance Infrastructure Ltd’ with a target price of Rs. 425.00 on the stock.
QUARTERLY HIGHLIGHTS (CONSOLIDATED)
Results updates- Q1 FY14,
Reliance Infrastructure Limited, together with its
subsidiaries, engages in the generation,
transmission, and distribution of electrical power in
India, reported its financial results for the quarter
ended 30th June, 2013.
Months Jun-13 Jun-12 % Change
Net Sales 54524.50 53830.80 1.29
PAT 4152.00 4119.70 0.78
EPS 15.79 15.66 0.78
EBITDA 10171.90 9891.70 2.83
The company’s net profit slightly increased to Rs. 4152.00 million against Rs. 4119.70 million in the
corresponding quarter ending of previous year, an increase of 0.78%. Revenue for the quarter rose by 1.29% to
Rs. 54524.50 million from Rs. 53830.80 million, when compared with the prior year period. Reported earnings
per share of the company stood at Rs. 15.79 a share during the quarter, registering 0.78% increase over previous
year period. Profit before interest, depreciation and tax is Rs. 10171.90 millions as against Rs. 9891.70 millions
in the corresponding period of the previous year.
Break up of Expenditure
Break up of Expenditure
Value in Rs. Million
Q1 FY14 Q1 FY13
Cost of Electrical Energy Purchased
22593.80 22503.80
Cost of Fuel 4437.40 4173.20
Cost of Material Consumed & Sub Contracting Charges
14394.30 14902.70
Employee Benefit Expenses 2913.70 3083.30
Depreciation & Amortization Expense
1361.30 1254.70
Other Expenses 2948.00 2450.20
Segment Revenue
Latest Updates
• Reliance Infrastructure has completed of widening of the entire 136 km Salem-Ulundurpet road in Tamil
Nadu through its Special Purpose Vehicle (SPV) - SU Toll Road Pvt. Ltd with a cost of Rs.1,061 crore.
• The Company’s ninth road project i.e. Jaipur to Reengus in Rajasthan has been completed and toll collection
has started.
• Reliance Infrastructure has announced that as per the Maharashtra Electricity Regulatory Commission
(MERC) order dated 22 August, 2013, RInfra has been allowed to recover past arrears, along with 14.5% per
annum carrying cost, at Rs. 925 crore per year, aggregating to Rs. 5,550 crore over the next 6 years. The
MERC has also allowed RInfra to recover revised Cross Subsidy Surcharge (CSS) of Rs. 819 crore for the
current FY 2013-14, Rs. 896 crore for FY 2014-15 and Rs. 590 crore for FY 2015-16.
• Reliance Infrastructure has tied up with the US based Innovari Inc., for the pilot implementation of the
Automatic Demand Response (ADR) in its licensed distribution area. With this RInfra became India’s first
power distribution company to launch globally successful ADR program for the benefit of its consumer in
Mumbai.
Projects
Metro Projects
• Reliance Metro Line I in Mumbai (12 kms & 12 stations):
� Civil work nearing completion. Signal testing and system integration process started
� Certification process to start commercial operations initiated
� Project is scheduled to be commissioned within 2013
• Reliance Metro Airport Line in Delhi (23 kms & 6 stations) :
� Metro line operations handed over to Delhi Metro Railway Corporation (DMRC) wef July 1, 2013
� Claims for termination payment are fully justified & enforceable and the Company is confident of
receiving the entire investment in Delhi Airport Metro Express Private Ltd (DAMEPL)
Cement:
• Developing two plants of 5 million tons each in Maharashtra and Madhya Pradesh (MP)
� Earned revenue of Rs. 175 mn from Butibori (0.6 mtpa) plant in Maharashtra in Q1 FY14.
� Maihar unit in Madhya Pradesh is on fast track and slated to commission in 2013.
COMPANY PROFILE
Reliance Infrastructure Ltd (RInfra) a part of Reliance Group is the largest infrastructure company developing
projects, through various Special Purpose Vehicles (SPVs), in several high growth areas in the Infrastructure
sector i.e. Roads, Metro Rail, Cement and Airports. The Company is also the leading utility company having
presence across the value chain of power businesses i.e. Generation, Transmission, Distribution, Trading and
EPC.
The SPVs are developing two metro rail projects in Mumbai; awarded eleven road projects with total length of
1,000 kms; operating and maintaining five airports in Maharashtra and developing 2 cement plants of 5 million
tons each in Maharashtra and Madhya Pradesh.
RInfra along with its wholly owned subsidiary generates over 940 MW of power through its five power stations;
distributes power to over 60 lakh consumers in Mumbai and Delhi and is developing five transmission projects
including the first Independent Private Transmission projects in India.
RInfra also provides Engineering, Procurement & Construction (EPC) services for developing power and road
projects.
Highlights for Company Profile
• One of the largest Indian business conglomerates.
• Leading Private Utility Firm in Transmission.
• Significant presence in EPC, Energy and Infrastructure.
Business Area
Company presence spans across three verticals:
1. Engineering, Procurement and Construction
2. Energy
3. Infrastructure
FINANCIAL HIGHLIGHT (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March31, 2012 -2015E
FY12A FY13A FY14E FY15E
SOURCES OF FUNDS (Rs.in.mn)
Shareholder's Funds
Share Capital 2630.30 2630.30 2630.30 2630.30
Reserves and Surplus 239811.80 258579.80 281335.17 305595.33
1. Sub Total - Net worth 242442.10 261210.10 283965.47 308225.63
2. Minority interest 2056.60 2312.20 2497.18 2622.03
Non Current Liabilities
Long term borrowings 117003.00 126357.10 133180.38 138507.60
Deferred Tax Liabilities 4510.90 5652.30 6330.58 6710.41
Other Long term liabilities 54895.90 34690.80 29487.18 31846.15
Long Term Provisions 3896.00 4184.10 4393.31 4569.04
3. Sub Total - Non Current Liabilities 180305.80 170884.30 173391.44 181633.20
Current Liabilities
Short Term Borrowings 64160.90 79784.70 94145.95 105443.46
Trade Payables 59906.40 68126.40 74939.04 80934.16
Other Current Liabilities 62508.20 79134.50 94961.40 106356.77
Short Term Provisions 2703.50 3507.40 4033.51 4477.20
4. Sub Total - Current Liabilities 189279.00 230553.00 268079.90 297211.59
Total Liabilities (1+2+3+4) 614083.50 664959.60 727933.99 789692.46
APPLICATION OF FUNDS
Non-Current Assets
Fixed Assets
Tangible assets 75053.30 84150.80 90882.86 97244.66
Intangible assets 37148.30 29013.00 30463.65 31682.20
Capital Work in Progress 27328.80 45228.40 54726.36 62935.32
Intangible assets under development 47511.00 54178.70 58755.45 62280.77
a) Sub Total - Fixed Assets 187041.40 212570.90 234828.32 254142.95
b) Non-current investments 92478.00 100339.50 106359.87 111677.86
c) Long Term loans and advances 33669.30 23476.80 24885.41 25880.82
d) Other non-current assets 82605.80 95216.80 104738.48 113117.56
1. Sub Total - Non Current Assets 395794.50 431604.00 470812.08 504819.20
Current Assets
Current Investment 30537.10 29342.80 30809.94 32042.34
Inventories 3778.60 4707.20 5460.35 6115.59
Trade receivables 48941.00 37578.80 33820.92 35511.97
Cash and Bank Balances 13770.30 4924.20 5515.10 6066.61
Short-terms loans & advances 104384.40 132950.50 152893.08 171851.82
Other current assets 16877.60 23852.10 28622.52 33284.93
2. Sub Total - Current Assets 218289.00 233355.60 257121.91 284873.26
Total Assets (1+2) 614083.50 664959.60 727933.99 789692.46
Annual Profit & Loss Statement for the period of 2012 to 2015E
Value(Rs.in.mn) FY12A FY13A FY14E FY15E
Description 12m 12m 12m 12m
Net Sales 242718.00 223815.50 243958.90 261036.02
Other Income 7611.20 10514.30 11355.44 11923.22
Total Income 250329.20 234329.80 255314.34 272959.23
Expenditure -214892.30 -194159.10 -207365.06 -220575.43
Operating Profit 35436.90 40170.70 47949.28 52383.80
Interest -13359.40 -16874.30 -18224.24 -20046.67
Gross profit 22077.50 23296.40 29725.03 32337.13
Depreciation -4033.30 -5511.00 -6062.10 -6789.55
Exceptional Items 0.00 3828.00 0.00 0.00
Profit Before Tax 18044.20 21613.40 23662.93 25547.58
Tax -5441.60 -2026.40 -3549.44 -4062.06
Profit After Tax 12602.60 19587.00 20113.49 21485.51
Minority Interest -54.90 -63.70 -67.52 -70.22
Share of Profit & Loss of Asso 3320.40 2945.00 2709.40 2844.87
Net Profit 15868.10 22468.30 22755.37 24260.16
Equity capital 2630.30 2630.30 2630.30 2630.30
Reserves 239811.80 258579.80 281335.17 305595.33
Face value 10.00 10.00 10.00 10.00
EPS 60.33 85.42 86.51 92.23
Quarterly Profit & Loss Statement for the period of 31st
Dec, 2012 to 30th Sep, 2013E
Value(Rs.in.mn) 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep-13E
Description 3m 3m 3m 3m
Net sales 52958.40 61873.50 54524.50 55614.99
Other income 2489.60 1657.70 2934.60 2582.45
Total Income 55448.00 63531.20 57459.10 58197.44
Expenditure -45206.00 -53388.80 -47287.20 -47884.51
Operating profit 10242.00 10142.40 10171.90 10312.93
Interest -4163.40 -4098.60 -4239.70 -4366.89
Gross profit 6078.60 6043.80 5932.20 5946.04
Depreciation -1359.30 -1638.80 -1361.30 -1415.75
Exceptional Items 3791.20 36.80 0.00 0.00
Profit Before Tax 8510.50 4441.80 4570.90 4530.29
Tax -2047.50 2110.40 -992.50 -906.06
Profit After Tax 6463.00 6552.20 3578.40 3624.23
Minority Interest 4.20 -58.50 -31.80 -33.39
Share of Profit & Loss of Asso 812.20 757.50 605.40 635.67
Net Profit 7279.40 7251.20 4152.00 4226.51
Equity capital 2630.30 2630.30 2630.30 2630.30
Face value 10.00 10.00 10.00 10.00
EPS 27.68 27.57 15.79 16.07
Ratio Analysis
Particulars FY12A FY13A FY14E FY15E
EPS (Rs.) 60.33 85.42 86.51 92.23
EBITDA Margin (%) 14.60% 17.95% 19.65% 20.07%
PBT Margin (%) 7.43% 9.66% 9.70% 9.79%
PAT Margin (%) 5.19% 8.75% 8.24% 8.23%
P/E Ratio (x) 6.30 4.45 4.39 4.12
ROE (%) 5.20% 7.50% 7.08% 6.97%
ROCE (%) 9.32% 9.77% 10.56% 10.72%
Debt Equity Ratio 0.75 0.79 0.80 0.79
EV/EBITDA (x) 7.54 7.50 6.71 6.45
Book Value (Rs.) 921.73 993.08 1079.59 1171.83
P/BV 0.41 0.38 0.35 0.32
Charts
OUTLOOK AND CONCLUSION
� At the current market price of Rs.380.00, the stock P/E ratio is estimated 4.39 x FY14E and 4.12 x FY15E
respectively.
� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 86.51 and Rs.
92.23 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 3% and 19% over 2012 to 2015E
respectively.
� On the basis of EV/EBITDA, the stock trades at 6.71 x for FY14E and 6.45 x for FY15E.
� Price to Book Value of the stock is expected to be at 0.35 x and 0.32 x respectively for FY14E and FY15E.
� We recommend ‘BUY’ in this particular scrip with a target price of Rs.425.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
The development of adequate infrastructure has been identified as the most critical pre-requisite for sustaining
the growth momentum of the economy and to ensure inclusiveness of the growth process. Hence, the
Government of India has set massive target by more than doubling the investments in infrastructure from Rs.
20.5 trillion in the 11th Five Year Plan (11th Plan) to Rs. 56.3 trillion during the 12th Five Year Plan (12th Plan)
i.e. 2012-17. The average investment for the 12th Plan as a percentage of GDP is expected to rise to 9.1 per cent
in the 12th Plan from 7.2 per cent in the 11th Plan. The Government has realized that this massive investment
will be feasible only through public-private-sector- participation (PPP) and hence, the share of private sector is
expected to increase from 38 per cent in the 11th Plan to 48 per cent in the 12th Plan.
Roads
Road infrastructure is of prime importance for the growth of economy. India has the second largest road network
in the world comprising of 4.24 million kms of which national highways constitute 2 per cent of the road network
but accounts for 40 per cent of total road traffic. The Planning Commission expects domestic passenger traffic to
increase at Compounded Annual Growth Rate (CAGR) of 12 per cent over the 12th Plan as with domestic cargo
traffic, whereas the international passenger traffic is expected to rise at CAGR of 8 per cent and the international
cargo traffic at 10 per cent CAGR over the same period. The Government in the budget for the year 2013-14 has
announced 3,000 kms of road projects to be awarded in the states of Gujarat, Madhya Pradesh, Rajasthan and
Uttar Pradesh in the first six months. The Government has proposed to set up a regulatory authority to address
the financial stress, construction risks and contract management in the road sector. The total investment in the
12th Plan is estimated to be Rs. 9,200 billion as against Rs. 5,160 billion in the 11th Plan, out of which Rs. 2,945
billion (i.e. 32 per cent) is expected to be financed by the private sector.
Power Sector
India has made rapid strides in the development of power sector both in terms of enhancing power generation as
well as in making power available to widely distributed geographical boundaries. India has the world’s fifth
largest electricity grid with over 210 GW capacities and the world’s third largest transmission and distribution
network. The power sector has been adversely affected over the past 12-18 months due to weak financial health
of the State Electricity Boards (SEBs), fuel shortages and unviable Power Purchase Agreements (PPAs). The
Planning Commission has proposed setting up of National Electricity Fund with a corpus of Rs. 1,000 – Rs. 1,500
crore with state run nodal agencies like Power Finance Corporation of India Limited and Rural Electrification
Corporation of India Limited to finance development of power transmission and distribution network by state
utilities aimed at reducing AT&C losses to 15 per cent in the country. Given the power shortages and increasing
demand for electricity, the total investment in the sector is expected to increase to Rs. 15,000 billion in the 12th
Plan from Rs. 8,045 billion in the 11th Plan.
Railways
One of the largest and busiest rail networks in the world, the Indian Railways is spread over 64,015 route
kilometres and is a major mode of transport for passenger and bulk freight traffic.
• The Indian Railways generated total approximate earnings on originating basis of Rs. 124, 814.87 crore (US$
21.52 billion) during 1st April 2012 to 31st March 2013 as against Rs. 104, 334.61 crore (US$ 18 billion)
during the corresponding period last year, registering an increase of 19.63 per cent. While the total goods
earnings increased by 23.24 per cent, total passenger revenue earnings shot up by 11.35 per cent.
The revenue earnings from other coaching amounted to Rs. 3, 137.92 crore (US$ 540.88 million) during 1st
April 2012 to 31st March 2013. The total approximate numbers of passengers booked during 1st April 2012
– 31st March 2013 were 8501.30 million compared to 8306.17 million during the same period last year,
showing an increase of 2.35 per cent.
• The cumulative foreign direct investment (FDI) inflow into the railways related components sector stood at
US$ 270.33 million from April 2000 to March 2013, according to statistics released by the Department of
Industrial Policy and Promotion (DIPP).
Road Ahead
Infrastructure segment is poised to explode with new developments and investments in the time to come as any
other industry’s progress would directly depend on basic infrastructure of the economy.
A recent study has stated 18,637 km of expressways need be built by the end of the 13th Five-Year Plan period,
i.e. 2022. Infrastructure development (for expressway projects alone), on such a massive scale would require
about Rs 450,000 crore (US$ 77.54 billion), according to the study.
In addition to that, Indian Railways is expected a clock a healthy 5.5 per cent growth in freight traffic in 2013-14
as against a 4 per cent growth for 2012-13, according to a report from the Centre for Monitoring Indian Economy
(CMIE). This growth is expected to come on the back of a healthy growth in the freight traffic of commodities like
coal, cement, iron ore for steel plants and fertilizers.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – info@firstcallindia.com
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