Ircon International Seals Deal with Sri Lanka Railways, Share Price Climbs

Ircon International Seals Deal with Sri Lanka Railways, Share Price Climbs Image/Mint

VoM News Desk | September 25, 2023 | 02:34 PM IST | Breaking News | Follow on Google News

Ircon International Seals Deal with Sri Lanka Railways, Share Price Climbs

Ircon International, a major player in the infrastructure sector, witnessed a gain of over 2% in its share price on Monday. This surge followed the successful execution of a contract agreement between Ircon International and Sri Lanka Railways.

The contract involves the procurement of Design, Installation, Testing, Commissioning, and Certification of the Signalling and Telecommunication system. This project spans from Maho Junction (including) to Anuradhapura (excluding) under the Indian Line of Credit. The total value of the contract is approximately $14.89 million, equivalent to ₹122 crore in Indian currency.

Ircon International has committed to completing this project within 24 months from the date of the contract signing, as stated in a regulatory filing. As of June 30, the company’s order book stood at ₹324 billion, with a significant 73% exposure to the railways sector. Ircon has also made its presence felt in other sectors, including metros, roads, and various infrastructure spheres.

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In addition to this positive development, brokerage firm Antique Stock Broking has initiated coverage on Ircon International with a ‘Buy’ rating and set a target price of ₹176 per share. This target implies an upside of over 24% from the closing price on Friday. The brokerage firm highlighted that a substantial portion of Ircon’s revenue is derived from EPC services, making it asset-light and contributing to high RoE.

Ircon International Seals Deal with Sri Lanka Railways, Share Price Climbs

Antique Stock Broking noted that Ircon’s seemingly low RoE is influenced by non-core factors such as its own cash reserves of ₹9 billion, investments of ₹22 billion, and an additional investment plan of ₹12 billion. Ircon also has ambitious plans to expand into high-speed rail, semi-high-speed rail, solar, and road projects, with a target revenue range of ₹100–120 billion.

The brokerage firm predicts a 10% CAGR in revenue and net profit over the next three years. However, it also highlighted potential risks, including competitive intensity, delays in linear infrastructure projects, and challenges related to big-ticket projects with competitive margins and capital allocation.

As of 10:25 am, Ircon International’s share price was trading 0.67% higher at ₹142.40 apiece on the BSE.

[Disclaimer: The views and recommendations mentioned above are those of individual analysts or brokerage firms and do not represent the views of Mint. Investors are advised to consult certified experts before making investment decisions.]

VoM News Desk

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