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In-line performance; order pipeline remains robust

-      IRB Infrastructure (IRB)’s revenue grew 27% YoY to INR20.6b in 4QFY24 (in line). EBITDA margin came in at 43.2% (down 370bp YoY, below our estimate of 45%). EBITDA grew 17% YoY to INR8.9b, in line with our estimate.

-      Higher interest costs of INR2.4b were attributed to the notional interest accrued on the deferred payment of acquisition costs of concession arrangements in SPV. This increase was partly offset by higher other income. APAT grew 45% YoY to INR1.9b, in line.

-      Construction revenue stood at INR14.4b, up 31% YoY during the quarter, while BOT revenue stood at INR6.2b (+18.7% YoY).

-      During FY24, revenue was up 15.7% YoY to INR74.1b, EBITDA grew 3% YoY to INR33.3b, EBITDA margin was 45%, and APAT dipped ~16% YoY to INR6b.

-      The order book stood at ~INR348b (excl. GST) at end-4Q. The O&M order book stood at INR291b, while the construction order book stood at INR57b.

-      IRB’s performance was in line with our expectation. Given its strong order pipeline of INR2t and the company’s track record of winning 25-30% of the project pipeline, we expect IRB’s order inflows to pick up. With a strong order book of INR348b as of Mar’24 and a robust tender pipeline, driven by BOT projects, we expect a revenue CAGR of ~13% over FY24-26. We broadly retain our APAT estimates for FY25/FY26. Reiterate Neutral with a revised SoTP-based TP of INR61.

Robust order pipeline along with a strong balance sheet

-      Awarding by NHAI has been subdued in FY24, with only ~2,500km of projects awarded in FY24. Despite this, IRB's order book remains healthy. The tender pipeline remains robust at INR2t, of which IRB is targeting to win at least INR200-250b worth of orders in FY25. IRB’s priority would be BOT toll projects, followed by TOT projects, and then HAM projects.

-      As of Mar’24, the company's cash position stood at INR27b, with minimal equity commitments in FY25. This financial strength provides IRB with the flexibility to bid for the strong order pipeline of INR2t.

Key takeaways from the management commentary

-      As of Mar’24, the company's order book stood at INR348b. Within this order book, the EPC segment accounted for INR57b, providing robust revenue visibility for IRB’s construction segment for the next two to three years. The O&M order book has been close to INR291b.

-      The financial closure for the TOT-12 and TOT-13 projects has been achieved, with upfront payments of INR44.3b and INR16.8b made to NHAI, respectively. Both TOT-12 and TOT-13 have received Appointed Dates (ADs) from NHAI, and accordingly tolling on both these projects commenced from Apr’24.

-      IRB had a market share of over 25-30% in awarded BoT and ToT projects in the past and expects to maintain that share in the future as well.

-      The construction vertical is likely to clock ~15% CAGR over the next two to three years with a stable EBITDA margin

Valuation and view

-      Fueled by a robust order book and a strong tender pipeline, primarily due to the BOT projects, we expect IRB’s execution to pick up, leading to ~13% CAGR in revenue and sustained margins. We broadly retain our APAT for FY25E/FY26E. Reiterate Neutral with a revised SoTP-based TP of INR61.

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