Anand Rathi:; Buy Jyoti Structures 3Q lower than estimated, execution to pick up in 4Q

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Jyoti Structures
3Q lower than estimated, execution to pick up in 4Q; Buy
We maintain our positive stance on Jyoti Structures following an
expected pick-up in orders and execution, steady operating
margins, a 13% earnings CAGR over FY10-13 and attractive
valuations. We retain our Buy, with a revised target of `143 (from
`157 earlier) based on 12x FY12e earnings.

 3QFY11 results. Jyoti’s revenue grew 7.7% yoy, to `5.5bn, 10.2%
lower than our estimate mainly on account of deferred revenue
booking on projects. EBITDA grew 5.9% yoy, to `629m. Net
profit grew 5.7% yoy, to `247m, sharply lower than we expected.
However, management has maintained its revenue guidance for
FY11, at `24bn.
 Order book and inflows. The order book was `41bn, 2x FY10
sales. Orders in 3Q were `4bn (9MFY11: `16.4bn). We expect
orders of `8bn in 4Q and an order book of `43bn by Mar’11.
 Change in estimates. We lower our revenue forecasts 3.4%/
6.2% for FY11/FY12 respectively owing to lower assumptions of
execution rates and order inflows. We lower our earnings
estimates 5.3%/9% for FY11/12 respectively on account of
minor changes to net interest costs and taxation.
 Valuation and Risks. At the current price, the stock trades at PE of
8.7x and PBV of 1.1x FY12 estimates. We maintain our Buy rating,
with a target of `143, based on 12x FY12e earnings. Key risks are
rising commodity prices and interest costs and competition.