IRB Infra zooms 10% after Kotak upgrades stock, raises fair value

Shares of IRB Infrastructure Developers Ltd surged as much as 10 percent on March 21 after Kotak Institutional Equities upgraded the stock and raised the fair value (FV), driven by adjustments to traffic estimates for private InvIT assets.

Road sector awarding has shifted to toll -operate-transfer (TOT) and build-operate-transfer (BOT) projects, with the NHAI’s focus on managing its debt levels. IRB, with its strong balance sheet, is best placed to benefit, according to the brokerage said.

The Ministry of Road Transport and Highways has amended the model concession agreement for BOT and TOT mode of awarding, which bodes well for IRB Infra, Kotak noted. IRB Private InvIT holds a portfolio of 10 existing BOT assets and five recently awarded assets.

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“With a Rs 44,400-crore BOT pipeline for FY24, we see players such as IRB, with a strong balance sheet to be a key beneficiary and could garner a healthy market share,” Kotak said in its recent report.

Analysts at Kotak revised estimates by 1-7 percent for FY24-26, driven primarily by adjusting our traffic estimates for the private InvIT projects. “We upgrade IRB Infra to ‘add’ from ‘sell’, after a 22 percent decline since our downgrade. We increase our fair value to Rs 65 (from Rs 60 earlier) driven by adjustments to our traffic estimate for Private InvIT assets,” it said.

According to Motilal Oswal, IRB Infra, with a diverse variety of investors, is uniquely positioned to expand its asset base, and drive sustainable growth. “The company will benefit from the growing EPC and O&M order book, which stood at Rs 36,200 crore as of December 2023,” it said.

With a robust tender pipeline of projects to be awarded by the NHAI and a healthy order book, Motilal Oswal expects IRB to register a 12 percent revenue CAGR over FY24-26 with sustained margins.

The domestic brokerage reiterated its ‘neutral’ rating on the stock with a SoTP-based target price of Rs 60.

Also Read | Buy IRB Infrastructure Developers; target of Rs 94: Ventura Securities

At 11:23am, IRB Infra shares were trading at Rs 58.05 on the National Stock Exchange (NSE), up 7 percent from the previous close. The multibagger stock has rallied over 130 percent in the last one year, outperforming benchmark Nifty 50 which has risen 28 percent during this period.

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