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India Equity Research Reports, IPO and Stock News
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Huge opportunity for transmission EPC players: The
government has envisaged an investment of `240,000cr in the
transmission segment under the Twelfth Five-Year Plan, an
increase of over 70% from the investments planned during the
Eleventh Plan. As per our estimates, this has opened substantial
potential opportunity for the transmission EPC players such as
Jyoti Structure (JSL).
Forays into Americas: JSL is in the process of setting up lattice
tower manufacturing facility in USA through a 100% subsidiary.
Management informs that the USD 30mn facility would have a
capacity to manufacture ~30,000 tpa of tower manufacturing.
Equity portion of USD12mn would be fully funded through
internal resources. The company expects the facility to be
commissioned by December 2011 and commercial production
is expected to begin by January 2012.
Robust order book: JSL has a robust order book of `4,100cr
(1.7x FY2011E sales), which provides good revenue visibility and
cushions the company from short-term order fluctuations.
Order backlog at the end of 3QFY011 is spread across the
transmission (80%), rural electrification (15%) and substation
segments (5%). PGCIL orders constituted ~26% of the order
backlog, while the private sector and various state utilities
accounted for 16% and 58%, respectively. In line with the past
trend, domestic orders constituted ~82% of the total order
backlog. The company's large domestic presence insulates its
margins from raw-material price fluctuations and from volatile
currency movements. When compared with the other EPC
companies such as KEC International and Kalpataru Power
Transmission, which have substantial exposure to international
projects, JSL's order backlog is largely skewed in favor of the
fixed price domestic markets and is therefore insulated from the
vagaries of fluctuating commodity prices.
NCD Issue to trim Interest cost: JSL is in the process of issuing
Non Convertible Debentures (NCD) to finance its working
capital requirements. Under the terms of the issue, the existing
shareholders would be eligible to receive 10.26 mn NCD of the
face value of `120 each together with 20.52 mn detachable
warrants of `120 each. The ratio of allotment has been fixed as
1 NCD with 2 detachable warrants for every 8 shares held on
the record date. Excluding the conversion of warrants, the
company would receive `123cr from the issue of NCD.
Assuming full conversion, the total proceeds from the above
issue, including the conversion of warrants would be `369cr.
Total debt in JSL's books at the end of 3QFY2011 was ~ `413cr
with an average interest cost of ~10.25% p.a. The NCD issue of
`123cr would enable the company to reduce its interest cost by
~3-4% during FY12 and thereafter the NCD is expected to be
redeemed during March-April 2012
Business Outlook: In terms of order flow visibility, Management
informs that PGCIL is likely to invite bids worth `1,000cr during
4QFY2011 in addition to `2,000cr of technical bids that are
expected to be opened during the same period. Private sectors
BOOT projects from Reliance Infra (~ valued at `2,000 - 2,200cr)
and Sterlite Technologies (~ valued at `1,300 - 1,400cr) are
likely to be awarded in the near future. Various tenders for
transmission projects are likely to be released in South Africa,
Ethiopia, Nigeria and Bangladesh.
Outlook and Valuation: Transmission EPC companies are
expected to register increase in order inflow on the back of the
ongoing investments in the domestic power sector. Order
inflows from PGCIL have been relatively lower during the first
nine months of the current fiscal. However, industry
commentary indicates that the ordering activity from PGCIL is
likely to gather pace from the early part of FY2012. Apart from
the transmission projects, JSL is also expected to garner
significant portion of orders from RAPDRP and RGGVY schemes.
At the current price, the stock is quoting at 9.6x and 7.3x FY2011E
and FY2012E EPS, respectively. We maintain a Buy on the stock,
with a Target Price of `150.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Huge opportunity for transmission EPC players: The
government has envisaged an investment of `240,000cr in the
transmission segment under the Twelfth Five-Year Plan, an
increase of over 70% from the investments planned during the
Eleventh Plan. As per our estimates, this has opened substantial
potential opportunity for the transmission EPC players such as
Jyoti Structure (JSL).
Forays into Americas: JSL is in the process of setting up lattice
tower manufacturing facility in USA through a 100% subsidiary.
Management informs that the USD 30mn facility would have a
capacity to manufacture ~30,000 tpa of tower manufacturing.
Equity portion of USD12mn would be fully funded through
internal resources. The company expects the facility to be
commissioned by December 2011 and commercial production
is expected to begin by January 2012.
Robust order book: JSL has a robust order book of `4,100cr
(1.7x FY2011E sales), which provides good revenue visibility and
cushions the company from short-term order fluctuations.
Order backlog at the end of 3QFY011 is spread across the
transmission (80%), rural electrification (15%) and substation
segments (5%). PGCIL orders constituted ~26% of the order
backlog, while the private sector and various state utilities
accounted for 16% and 58%, respectively. In line with the past
trend, domestic orders constituted ~82% of the total order
backlog. The company's large domestic presence insulates its
margins from raw-material price fluctuations and from volatile
currency movements. When compared with the other EPC
companies such as KEC International and Kalpataru Power
Transmission, which have substantial exposure to international
projects, JSL's order backlog is largely skewed in favor of the
fixed price domestic markets and is therefore insulated from the
vagaries of fluctuating commodity prices.
NCD Issue to trim Interest cost: JSL is in the process of issuing
Non Convertible Debentures (NCD) to finance its working
capital requirements. Under the terms of the issue, the existing
shareholders would be eligible to receive 10.26 mn NCD of the
face value of `120 each together with 20.52 mn detachable
warrants of `120 each. The ratio of allotment has been fixed as
1 NCD with 2 detachable warrants for every 8 shares held on
the record date. Excluding the conversion of warrants, the
company would receive `123cr from the issue of NCD.
Assuming full conversion, the total proceeds from the above
issue, including the conversion of warrants would be `369cr.
Total debt in JSL's books at the end of 3QFY2011 was ~ `413cr
with an average interest cost of ~10.25% p.a. The NCD issue of
`123cr would enable the company to reduce its interest cost by
~3-4% during FY12 and thereafter the NCD is expected to be
redeemed during March-April 2012
Business Outlook: In terms of order flow visibility, Management
informs that PGCIL is likely to invite bids worth `1,000cr during
4QFY2011 in addition to `2,000cr of technical bids that are
expected to be opened during the same period. Private sectors
BOOT projects from Reliance Infra (~ valued at `2,000 - 2,200cr)
and Sterlite Technologies (~ valued at `1,300 - 1,400cr) are
likely to be awarded in the near future. Various tenders for
transmission projects are likely to be released in South Africa,
Ethiopia, Nigeria and Bangladesh.
Outlook and Valuation: Transmission EPC companies are
expected to register increase in order inflow on the back of the
ongoing investments in the domestic power sector. Order
inflows from PGCIL have been relatively lower during the first
nine months of the current fiscal. However, industry
commentary indicates that the ordering activity from PGCIL is
likely to gather pace from the early part of FY2012. Apart from
the transmission projects, JSL is also expected to garner
significant portion of orders from RAPDRP and RGGVY schemes.
At the current price, the stock is quoting at 9.6x and 7.3x FY2011E
and FY2012E EPS, respectively. We maintain a Buy on the stock,
with a Target Price of `150.
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