Sadbhav’s management is enthused about the resurgence of the Indian roads sector after bidding hiatus and poor traffic. The management highlighted that although traffic declined by cumulatively ~8% over the last three years, traffic growth has been sharp at 10% across toll roads in the last 3-4 months and as high as 16% in projects like Hyderabad-Yadgiri. It expects NHAI order awards to pick up by Sep-14 and expects to add orders worth Rs60bn (~Rs20bn in the BOT format) in the next two years, which would support construction revenue growth.
The equity deficit (at ~Rs1.5bn currently) has reduced materially and any further requirement can be easily met through securitisation of operational assets. The long-term equity needs will be supported by internal accruals or through further asset monetisation (if necessary). Our TP is currently Rs193, implying 2.0x FY15 consolidated book. This may increase to Rs221/245 under optimistic/highly optimistic scenarios, implying 2.2x/2.4x FY16 consolidated book
