20150811-Maybank_KERPL-Execution_on_track__A_value_BUY_11页_506kb

报告摘要

Performance: The company is executing on track, with a value-based BUY recommendation.
1Q Performance:
- Revenue/EBITDA growth of 17% / 25% YoY was in line with expectations.
- EPS missed due to high interest expense.
- Adjusted EPS for FY16/17F was revised due to a lower interest capitalization rate.
Projects:
- Scheduled to start three projects worth INR20b in FY16.
- These projects will generate total toll income of INR2.5b annually.
- Four new projects were secured, increasing the backlog by INR50b to INR158b.
- These projects are expected to generate an IRR of 14–16%.
Debt Risks:
- Current P/BV is 0.6x, which is considered low.
- Despite a high debt-to-equity ratio of 4.2x, the cash flow is sufficient to service debt.
- Debt-to-equity ratio is expected to decline as new projects ramp up.
Catalysts:
- Fund raising through the sale of operational roads and/or securitization of annuity projects.
- Recent project completions may improve financials.

Metric	FY14A	FY15A	FY16E	FY17E	FY18E
Revenue (INR m)	65,870.4	63,623.5	72,821.8	85,700.3	96,270.4
EBITDA (INR m)	18,896.3	19,999.1	24,346.5	30,989.2	34,240.5
Core Net Profit (INR m)	4,630.0	4,436.0	963.3	3,527.5	4,374.2
Core EPS (INR)	24	18	4	14	18
Core EPS Growth (%)	-11.0	-24.6	-78.3	266.2	24.0
Net Dividend Yield (%)	2.8	2.8	2.8	2.8	2.8
ROAE (%)	11.2	8.6	1.7	6.1	7.2
ROAA (%)	1.9	1.5	0.3	0.9	1.0
EV/EBITDA (x)	11.5	13.9	12.5	11.1	11.4
Net Debt/Equity (%)	411.4	397.2	468.1	nm	nm

Metric	Target Price (INR)	Positive	Neutral	Negative
Market Recs	6	3	0	-
Target Price (INR)	269	174	37.9	-
'16 PATMI (INR m)	963	4,322	-77.7	-
'17 PATMI (INR m)	3,527	5,105	-30.9	-

Metric	Value
52-week high/low (INR)	224/140
3-month average turnover (USD m)	0.8
Free float (%)	22.3
Issued shares (m)	247
Market capitalization	INR34.9B
Major Shareholders:
- Infrastructure Leasing & Financial Services	70.8%
- IL&FS Investment Managers Ltd. (Private)	3.3%
- Deer Management Co. LLC	2.2%

New Projects Secured:
1. Amravati Chikli (Capex: INR23b)
2. Fagne - Guj/Mah border (Capex: INR19b)
3. Jharkhand outer ring road 2 (Capex: INR6b)
4. Gujarat RoB annuity projects (Capex: INR2.5b)
Backlog: Increased by INR50b to INR158b.
IRR: Expected to be 14–16% for new projects.

FY16 Interest Capitalization Rate: Expected to be 19%, down from 23% in 1QFY16.
Impact on Interest Expense: Increased to INR24b from INR20b.
Cash Flow Consideration: Full interest cost is factored into cash flow forecasts, not a concern for cash flow.

Toll Income: Expected to rise to INR19.1b from INR14.2b YoY.
IRR: Existing projects are expected to generate 15% over the next two years.
ROE: Expected to rise to 14% in FY17 from 9% currently.
Core P/E: 36.2x for FY16E, indicating a potential undervaluation.

The company is currently undervalued, trading at 0.6x P/BV.
The sharp drop in share price may be overdone given the company's ability to service debt.
New projects are expected to improve the financial position and generate higher returns.
Despite a high debt-to-equity ratio, cash flow is sufficient.
The target price of INR269 is based on DCF analysis and is maintained.
The company is actively working on raising funds through asset sales and project completion.

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