Ircon International Q4 results: Key takeaways for investors

Aircon International Results for the third quarter of March 2023 were announced on Wednesday.

The company reported good numbers for March 2023 and FY23. The company’s operating revenue increased by 28 per cent year-on-year to Rs. 3,780 crore in the fourth quarter of FY23, while EBITDA grew by 37.4 per cent year-on-year to Rs. 370 crore in the same period. The company’s net profit also grew by 11% YoY in the March 2023 quarter to Rs.257 crore. Net profit growth was lower due to lower joint venture earnings and higher tax expense in the quarter. However, the company’s EBITDA margin in the March 2023 quarter was 9.01 percent, which was 100 basis points higher year-on-year, reflecting good operating performance.

order book

The company’s order book as on 31st March 2023 was INR 35,195 crore, which is 7.4 per cent lower than the December 2022 quarter. The company’s order book comprises 74.5% of railway projects and the remaining 19.9% ​​of highway and other projects. Of the total order book, the company has 52.5 percent of the projects realized by means of competitive bids and the remainder on the basis of nomination from various government bodies (being a special support unit). The book-to-bill ratio (based on FY23 revenue) is 3.27 times, giving a 3-year revenue forecast. Management stated that in fiscal ’23, the focus was on executing projects and they weren’t aggressively bidding in order to maintain margins. Management has stated that going forward, the focus will also be on acquiring new orders as margins can be maintained along with execution.

Outlook and direction:

The company has given revenue guidance of 5-7% growth for FY24, EBITDA guidance of 10-11%, and EBIT guidance of 7-7.5% in FY24.

The government’s increased push on capital expenditure, as indicated in the recent union budget, with ₹2.4 crore on railways and ₹2.7 crore on road infrastructure, is favorable to the company. The company has good operating capacity as evidenced by the recent financial statements and has a strong cash position of Rs. 3,718.3 crore (49 per cent of current market value). The company’s twelve-month late policy ratio is 9.89x. Other infrastructure companies, such as RVNL, KNR Construction, PNC Infratech, and L&T, trade with PE reductions of 16.6x, 15.4x, 10.5x, and 29.5x, respectively.

In our bl.portfolio issue dated February 12, 2020 We had recommended IRCON International when it was trading at $55. Our thesis was based on the large order book, strong cash position, and cheap valuations. We continue to maintain our positive view of the stock.