IVRCL: It's raining orders

THE COMPASS

It’s among the few stocks that have gained in a weak market; IVRCL has risen a smart 69 per cent between the end of October and now after having won a couple of orders worth Rs 1,276 crore. Since the start of the year though the stock has lost 74 per cent. The Rs 3,661 crore firm, which implements primarily water and irrigation projects, has bagged orders from CIDCO and a drinking water supply project on the Godavari.

That has pushed up its order book to Rs 15,000 crore, which is around four times its 2007-08 sales. Besides, it should also benefit from the impetus to infrastructure since more than 90 per cent of its revenues flow in from government-owned and aided outfits. However, there could be some loss of momentum because of the elections. So far though, it’s been great going; the first half of 2008-09 saw net sales soar by 51 per cent y-o-y to Rs 2,065 crore.

While the pace could taper off, analysts are nevertheless pencilling in a compounded annual growth of around 35 per cent between 2008-2010. The increasing cost of inputs hasn’t hurt margins because costs have been passed on to customers. With prices of inputs coming down, the operating margin of 8.3 per cent posted in the first half of 2008-09 could improve.

However, the bottom line has been hurt by higher interest charges and unless interest rates come off, net profits for the rest of the year, may grow at a somewhat slower pace than they did in the first half when they were up 37 per cent at Rs 100 crore. Net profits in 2007-08 rose 52 per cent to Rs 211 crore.