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J KUMAR INFRAPROJECTS LTD
RECOMMENDATION: BUY
TARGET PRICE: RS.210
FY12E P/E: 4.5X
q J Kumar Infraprojects revenues reported 24% growth for Q3FY11 vis-à-vis
same period last year. This was lower than our expectations and was
impacted by lower than expected order inflow in 9MFY11.
q Operating margin performance was marginally lower than our estimates
and margins stood at 14.2% for Q3FY11. This was due to commencement
of work on recently won projects in Ahmedabad where work has not
reached revenue recognition stage while costs have been incurred.
q Net profits reported a growth of 8% for Q3FY11 as against same period
last year. This was impacted by higher interest expenses.
q We had expected a revival in order inflow from Q3FY11 onwards for the
company but that has not happened for the entire sector due to issues
related to delays in award activity from NHAI, lower funds availability
with the state government departments as well as changes at key ministry
levels. However, we do expect order inflow to witness an improvement
in FY12 in comparison with FY11. Based on lower than expected
order inflow seen in 9MFY11, we revise our order inflow estimates for
the company downwards for the full year. This results in downward revision
in our estimates for revenues and profits. We thus expect revenues
to grow at a CAGR of 25% and net profits to grow at a CAGR of 13%
between FY10-FY12.
q At current price of Rs 145, stock is trading at 5.4x and 4.5x P/E multiples
for FY11 and FY12 respectively. Post revising our estimates, we arrive at
a revised price target of Rs 210 based on 6.5x one year forward P/E multiple
(Rs 278 earlier). We reduce our valuation multiple for the company
to factor in lower order inflows seen till date in FY11. However based on
decent upside from the current levels, we upgrade the stock to BUY from
ACCUMULATE earlier. Company may get re-rated on further order announcements.
Revenues lower than our estimates
n J Kumar Infraprojects revenues reported 24% growth for Q3FY11 vis-à-vis same
period last year. This was lower than our expectations and was impacted by
lower than expected order inflow in 9MFY11.
n Current order book of the company stands at Rs.13.11 bn and is diversified
across transportation (86%), civil (5%), irrigation (8%) and piling (1%) and provides
visibility for next 1.5 years. Order inflow during Q3FY11 stood at Rs 2.4 bn
while for FY11 till date, it stood at nearly Rs 4 bn.
n Revenues in Q3FY11 came primarily from transportation segment (95%) and
other segments such as piling contributed 5% of the total revenues.
n JKIL is also prequalified for a large number of projects and has submitted RFQ's
for various projects from PWD-Govt of Rajasthan, MPRDC - Bhopal, NHAI, PWD
-Govt of Maharashtra etc in joint venture with players like PBA, Supreme Infra,
Kakade Infra as well as independently.
n Company had also placed bids for road BOT projects in Rajasthan while decision
is still awaited from these projects.
n We had expected a revival in order inflow from Q3FY11 onwards for the company
but that has not happened for the entire sector due to issues related to
delays in award activity from NHAI, lower funds availability with the state government
departments as well as changes at key ministry levels. We thus reduce
our order inflow estimates and correspondingly revise our revenue estimates
downwards.
n Going ahead, company expects order inflow to witness an improvement primarily
from the state governments as well as from NHAI.
n We thus expect order inflow of Rs 7 bn and Rs 15 bn for FY11 and FY12 respectively
and expect revenues to grow at a CAGR of 25% between FY10-FY12.
Operating margins marginally lower than estimates
n Operating margin performance was marginally lower than our estimates and
margins stood at 14.2% for Q3FY11.
n This was due to commencement of work on recently won projects in
Ahmedabad where work has not reached revenue recognition stage while costs
have been incurred.
n We maintain our estimates and expect margins to remain around 15.5% and
15% for FY11 and FY12 respectively.
Net profit growth impacted by higher interest expense
n Net profits reported a growth of 8% for Q3FY11 as against same period last
year. This was impacted by higher interest expenses.
n Interest cost has witnessed an increase due to increase in working capital requirements.
JKIL has paid advances to its subsidiary for purchasing an office
building in Vile Parle (E) with an area of approx 50000 sq ft. Company has paid
Rs 460 mn upfront since it was getting the premises at a rate which was much
less than the market rate.
n Post revising our estimates, we expect net profits to grow at a CAGR of 13%
between FY10-FY12.
Valuation and recommendation
n At current price of Rs 145, stock is trading at 5.4x and 4.5x P/E multiples for
FY11 and FY12 respectively.
n Post revising our estimates, we arrive at a revised price target of Rs 210 based on
6.5x one year forward P/E multiple (Rs 278 earlier).
n We reduce our valuation multiple for the company to factor in lower order inflows
seen till date in FY11.
n However based on decent upside from the current levels, we upgrade the stock
to BUY from ACCUMULATE earlier.
n Company may get re-rated on further order announcements.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
J KUMAR INFRAPROJECTS LTD
RECOMMENDATION: BUY
TARGET PRICE: RS.210
FY12E P/E: 4.5X
q J Kumar Infraprojects revenues reported 24% growth for Q3FY11 vis-à-vis
same period last year. This was lower than our expectations and was
impacted by lower than expected order inflow in 9MFY11.
q Operating margin performance was marginally lower than our estimates
and margins stood at 14.2% for Q3FY11. This was due to commencement
of work on recently won projects in Ahmedabad where work has not
reached revenue recognition stage while costs have been incurred.
q Net profits reported a growth of 8% for Q3FY11 as against same period
last year. This was impacted by higher interest expenses.
q We had expected a revival in order inflow from Q3FY11 onwards for the
company but that has not happened for the entire sector due to issues
related to delays in award activity from NHAI, lower funds availability
with the state government departments as well as changes at key ministry
levels. However, we do expect order inflow to witness an improvement
in FY12 in comparison with FY11. Based on lower than expected
order inflow seen in 9MFY11, we revise our order inflow estimates for
the company downwards for the full year. This results in downward revision
in our estimates for revenues and profits. We thus expect revenues
to grow at a CAGR of 25% and net profits to grow at a CAGR of 13%
between FY10-FY12.
q At current price of Rs 145, stock is trading at 5.4x and 4.5x P/E multiples
for FY11 and FY12 respectively. Post revising our estimates, we arrive at
a revised price target of Rs 210 based on 6.5x one year forward P/E multiple
(Rs 278 earlier). We reduce our valuation multiple for the company
to factor in lower order inflows seen till date in FY11. However based on
decent upside from the current levels, we upgrade the stock to BUY from
ACCUMULATE earlier. Company may get re-rated on further order announcements.
Revenues lower than our estimates
n J Kumar Infraprojects revenues reported 24% growth for Q3FY11 vis-à-vis same
period last year. This was lower than our expectations and was impacted by
lower than expected order inflow in 9MFY11.
n Current order book of the company stands at Rs.13.11 bn and is diversified
across transportation (86%), civil (5%), irrigation (8%) and piling (1%) and provides
visibility for next 1.5 years. Order inflow during Q3FY11 stood at Rs 2.4 bn
while for FY11 till date, it stood at nearly Rs 4 bn.
n Revenues in Q3FY11 came primarily from transportation segment (95%) and
other segments such as piling contributed 5% of the total revenues.
n JKIL is also prequalified for a large number of projects and has submitted RFQ's
for various projects from PWD-Govt of Rajasthan, MPRDC - Bhopal, NHAI, PWD
-Govt of Maharashtra etc in joint venture with players like PBA, Supreme Infra,
Kakade Infra as well as independently.
n Company had also placed bids for road BOT projects in Rajasthan while decision
is still awaited from these projects.
n We had expected a revival in order inflow from Q3FY11 onwards for the company
but that has not happened for the entire sector due to issues related to
delays in award activity from NHAI, lower funds availability with the state government
departments as well as changes at key ministry levels. We thus reduce
our order inflow estimates and correspondingly revise our revenue estimates
downwards.
n Going ahead, company expects order inflow to witness an improvement primarily
from the state governments as well as from NHAI.
n We thus expect order inflow of Rs 7 bn and Rs 15 bn for FY11 and FY12 respectively
and expect revenues to grow at a CAGR of 25% between FY10-FY12.
Operating margins marginally lower than estimates
n Operating margin performance was marginally lower than our estimates and
margins stood at 14.2% for Q3FY11.
n This was due to commencement of work on recently won projects in
Ahmedabad where work has not reached revenue recognition stage while costs
have been incurred.
n We maintain our estimates and expect margins to remain around 15.5% and
15% for FY11 and FY12 respectively.
Net profit growth impacted by higher interest expense
n Net profits reported a growth of 8% for Q3FY11 as against same period last
year. This was impacted by higher interest expenses.
n Interest cost has witnessed an increase due to increase in working capital requirements.
JKIL has paid advances to its subsidiary for purchasing an office
building in Vile Parle (E) with an area of approx 50000 sq ft. Company has paid
Rs 460 mn upfront since it was getting the premises at a rate which was much
less than the market rate.
n Post revising our estimates, we expect net profits to grow at a CAGR of 13%
between FY10-FY12.
Valuation and recommendation
n At current price of Rs 145, stock is trading at 5.4x and 4.5x P/E multiples for
FY11 and FY12 respectively.
n Post revising our estimates, we arrive at a revised price target of Rs 210 based on
6.5x one year forward P/E multiple (Rs 278 earlier).
n We reduce our valuation multiple for the company to factor in lower order inflows
seen till date in FY11.
n However based on decent upside from the current levels, we upgrade the stock
to BUY from ACCUMULATE earlier.
n Company may get re-rated on further order announcements.
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