Extended monsoon impact execution:
J.Kumar Infra (JKIL) reported sales of Rs3.09bn (down ~6.4% YoY) in Q2FY17, EBITDA at Rs563mn down 6% YoY, while EBITDA margins were up 10bps YoY to 18.2%. PBT was up 6% YoY to Rs 317Mn consequent to increase in other income by 106% to Rs 61mn. PAT was up by 5% YoY to Rs 230mn.The Company has since commenced work on the project like JNPT and metro line2/3 and expects the execution to pick up over the course of FY17.
Highlights of the conference call:
1)The order book at end of Q2FY17 stood at Rs100bn, 2) JKIL received orders worth Rs17.4bn in Q2FY17, 3) Expect revenue of ~Rs4bn from Mumbai metro in H2FY17 and ~Rs10-15bn in FY18, 4)Expecting sales of Rs2.5bn from JNPT road projects in H2FY17, 5) few large opportunity in next 6-12 months include Mumbai Trans harbour projects(Rs123bn), Mumbai metro line 2B(Rs20bn), Mumbai metro line 4(Rs20bn) and few large tunnel project and road project, 6) near term focus will be more on execution of current order book , 7) JKIL is seeing some delay due to change in lay out after the detailed design in Mumbai metro projects, 8) Have not received any further communication from BMC following the show case notice received in April 16, 9)sales guidance of Rs16-17bn in FY17 and ~Rs21bn in FY18.
Outlook and Valuation:
The stock is trading at 10.5x FY18E earnings. We believe that a well-funded balance sheet and strong track record will help JKIL to capitalise on huge opportunity in urban infrastructure over the next few years. We expect stock to deliver sales and PAT CAGR of 22%& 20%, respectively, over FY16-18E. We have cut our earnings by ~11% for FY18 to factor in the change in guidance due to delay seen in metro projects. We maintain Buywith Revised PT of Rs253 (Previous Rs285).
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