Merrill Lynch puts a BUY on IVRCL Infra with a Price Target of Rs 421

(My Original Blog Post: http://www.onlineequitycalls.com/2008/12/merrill-lynch-puts-a-buy-on-ivrcl-infra-with-a-price-target-of-rs-421/)
Merrill Lynch
India Research
IVRCL Infrastructures (IIFRF)-Reiterate BUY with a PO of Rs 421

Our PO of Rs 421 is based on the SOTP valuation. We have valued IVRCL core construction business 12x estimated 1 year forward earnings, a 25pct discount to E&C majors at Rs304 per share.

Hind-dorr-Oliver where IVRCL has 52.8pct stake is valued at CMP giving a per share value of Rs6 IVR Prime where IVRCL has 62.3pct stake is valued at 60pct discount to NPV at Rs62 per share in line with Mid Cap real estate companies.

Chennai desalination plant where IVRCL has 75pct stake is valued on a DCF basis at Rs12 per share. Similarly, Jalandhar-Amritsar project, Kumarapalayam-Chengapally project, and Salem-Kumarapalayam project where IVRCL has 100pct stake are valued based on DCF of Rs7, Rs12 and Rs17 per share respectively.

We arrive at an SOTP value of Rs421. Risks: Unrelated acquisition in Oil & Gas space, Government capex, raw material costs, competition, traffic/interest rate risk in toll/annuity projects and project execution risk.



Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

Source : Maverick