Why IRB Infra Share Price is Rising

Going by historical performance of Indian markets, data shows that markets usually perform on the bullish side in the run-up to Diwali's Muhurat trading session.

Even on the Diwali Muhurat trading day, benchmark indices and the markets overall have consistently provided encouragement to traders and investors.

We're witnessing this happen again! After a minor-hurdle faced in the last two weeks of October 2023, Indian markets have started to go up in November.

Several midcaps have delivered gains of up 20% in the past one week with Vodafone Idea, Trent, Yes Bank, and Info Edge topping the charts.

A notable midcap from the civil construction sector has also seen sharp moves. IRB Infra share price has gained over 13% in the past one month. In the past one year, the stock is up around 40%.

Let's look at why IRB Infra shares are rising and what lies ahead for the construction company.

#1 Robust Q2 Results

In the last week of October 2023, IRB Infrastructure Developers posted its quarterly numbers for the quarter ended September 2023.

The company reported a 12.2% rise in its consolidated net profit to Rs 957.4 million (m) compared to Rs 853 million posted in the year ago quarter. Net sales spiked to Rs 18.7 billion (bn) as against Rs 14.4 bn posted in the year-ago period.

While these are decent numbers, it was the management commentary that has set the stage for IRB Infra for the next couple of quarters.

The company's chairman and MD said that strong toll collections helped its performance while the commencement of tolling on Hyderabad Outer Ring Road also added to the numbers.

The company further said that the board of its private InvIT has declared a maiden distribution of Rs 1.6 bn and the same will be reflected in the cash flow of IRB Infra in the next quarter.

IRB Infrastructure Trust, which is IRB Infra's private InvIT, recently received a letter of award from the NHAI for Rs 44.3 bn Lalitpur Lakhnadon NH44 Toll-Operate-Transfer (TOT) project.

During the quarter under review, IRB Infra's order book expanded significantly to Rs 326.7 bn.

#2 Strong Toll Collections for September 2023

For the month of September 2023, IRB Infra reported a jump of around 28% in the toll collection. It clocked a toll of Rs 4.2 bn.

For the entire September 2023 quarter, toll revenue grew 22% to Rs 12.1 bn.

This is again attributed to the commencement of toll collection on newly added Hyderabad Outer Ring Road.

What Next for IRB Infra?

IRB Infra is sitting on a heavy order book with some prestigious projects including the Ganga Expressway BOT (Build-Operate-Transfer) project and Samakhiyali Tollway BOT project.

The company stands out in its segment as it has low dependency on external subcontracting. Usually, companies like IRB subcontract orders for execution. But IRB Infra already has a subsidiary - Modern Road Makers - which primarily focuses on EPC segments plus operation and maintenance.

As far as industry outlook is concerned, the government's continued focus on creating infrastructure and IRB Infra's ability to build its order book is expected to result in healthy revenue and profit growth.

With India on its path to becoming a US$ 5 trillion economy, infrastructure will play a major role. By boosting infrastructure, the government aims to boost many other sectors such as cement, steel, automobile, and real estate.

According to reports, the NHAI (National Highways Authority of India) is planning to award Rs 854 bn worth of priority category road projects in FY24, with Rs 400 bn specifically allocated for BOT road projects.

IRB Infrastructure Developers' primary clients are the Ministry of Road Transport and Highways (MoRTH) and the NHAI.

A word of caution...

Infra companies have time and again come under scrutiny on concerns about their debt. For IRB Infra, the debt to equity has been reducing consistently.

IRB Infra Debt to Equity

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Total Debt	165,994.8	91,925.0	185,820.8	159,298.4	157,421.1
Debt to Equity (x)	2.6	1.4	2.7	1.3	1.2

Data Source: Ace Equity

Before you choose any infra or construction company to ride the infra wave, look for consistency in revenue and profit growth.

Second, look for debt in the balance sheet and how the company has been managing it. Increasing debt can be a warning sign.

Last, check the future prospects of the company. A good order pipeline will translate into higher revenues, ultimately indicating good growth prospects.

How IRB Infra Share Price has Performed Recently

In the past five days, IRB Infra shares have gained 3%. In the past one month, the stock is up 14%.

In 2023 so far, IRB Infra is up 13% while over the past one year, IRB Infra shares are up around 40%.

IRB Infra has a 52-week high of Rs 37 touched on 20 October 2023 and a 52-week low of Rs 22.6 touched in March 2023.

Here's a table comparing IRB Infra with its peers.

Comparative Analysis

Company	IRB Infra	GMR Airports	H G Infra	ISGEG Heavy
ROE (%)	17.1	-11.3	25.1	6.5
ROCE (%)	22.8	1.1	21.7	8.8
Latest EPS (Rs)	22.3	-84.1	37.2	42.5
TTM PE (x)	29.1	-	34.8	19.4
TTM Price to book (x)	4.2	2.4	7.9	1.7
Dividend yield (%)	0.0	0.0	0.1	0.6
Industry PE	40.1
Industry PB	4.5

Data Source: Ace Equity, Equitymaster

About IRB Infra

IRB Infrastructure Developers has extensive experience in road and highway construction.

It is also present in multiple other sectors, including real estate, airport development, and maintenance of roads.

To know more, check out the company's financial factsheet and its latest quarterly results.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...