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4QFY11 results
Jain’s 4QFY11 net fell 7%YoY to 1.1bn and came below expectations on
the back of higher than expected interest costs. Ebitda rose 25%YoY –
inline with expectations led by a rebound in micro-irrigation revenues
growth to 36%YoY. Working cap ratios fell QoQ due to higher payables
and lower inventory. Worryingly, though, core receivables in microirrigation
rose ~30days QoQ to 372 days. A moderation in w-cap intensity
(quicker disbursement of subsidies, the ramp-up of the NBFC and higher
discounting albeit with attendant costs) will be key to a re-rating. O-PF.
4QFY11 net profits fell 7%YoY
Jain Irrigation’s 4QFY11 net profits fell 7%YoY to Rs1.1bn. Ebitda (Rs2.5bn)
rose 25%YoY – inline with expectations on the back of a smart rebound in
micro-irrigation topline growth to 36%YoY after two weak quarters. Margins
remained resilient as well at 31.6% allowing segment Ebitda to rise 36%YoY.
For the year, micro-irrigation topline rose 31%YoY to Rs17bn. With FY11
impacted by prolonged monsoons; we model a 35% growth in FY12-13.
Core PBT rose 16%YoY; higher interest costs hurt
The non micro-irrigation segments also did well in aggregate in 4Q with
revenues rising 20%YoY. High raw material costs hurt, though, with Ebitda
falling 10%YoY. Higher interest expenses (+39%YoY) also hurt in 4Q due to
rising interest costs on short term debt as well as higher bill discounting
charges. Overall core PBT rose 16%YoY in 4QFY11 with net profits dampened
due to a forex loss and exceptional provisions as well as a higher tax rate.
Lower working capital QoQ but irrigation receivables rise further
Core working capital remained flat QoQ at Rs24bn despite higher sales
implying that core working capital fell 22 days QoQ. We note that was led by
higher payables (+Rs3.7bnQoQ) and lower inventories (-Rs1.8vn QoQ).
Receivables rose Rs1.8n QoQ (Rs4.5bn before discounting) with debtors in
micro-irrigation actually rising ~30 days QoQ to 372 days. Net working
capital, after discounted receivables (Rs9.8bn), fell 50 days QoQ to 150 days.
Earnings changes; maintain BUY
The adverse Rs4.3bn change in working capital in FY11 pulled standalone FCF
to a negative Rs2.8bn implying that net gearing remains high at 1.6x. We are
cutting FY12-13 EPS by 2-4% to reflect higher interest but note that Jain
expects quicker payments by the government as mandated in the 2010
guidelines, higher receivables discounting and the gradual ramp-up of the
proposed NBFC to help moderate working capital intensity. A rebound in FCF
will be key allowing the stock to reflect the strength of the secular multi-year
micro-irrigation investment theme. Maintain O-PF with a target of Rs250.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QFY11 results
Jain’s 4QFY11 net fell 7%YoY to 1.1bn and came below expectations on
the back of higher than expected interest costs. Ebitda rose 25%YoY –
inline with expectations led by a rebound in micro-irrigation revenues
growth to 36%YoY. Working cap ratios fell QoQ due to higher payables
and lower inventory. Worryingly, though, core receivables in microirrigation
rose ~30days QoQ to 372 days. A moderation in w-cap intensity
(quicker disbursement of subsidies, the ramp-up of the NBFC and higher
discounting albeit with attendant costs) will be key to a re-rating. O-PF.
4QFY11 net profits fell 7%YoY
Jain Irrigation’s 4QFY11 net profits fell 7%YoY to Rs1.1bn. Ebitda (Rs2.5bn)
rose 25%YoY – inline with expectations on the back of a smart rebound in
micro-irrigation topline growth to 36%YoY after two weak quarters. Margins
remained resilient as well at 31.6% allowing segment Ebitda to rise 36%YoY.
For the year, micro-irrigation topline rose 31%YoY to Rs17bn. With FY11
impacted by prolonged monsoons; we model a 35% growth in FY12-13.
Core PBT rose 16%YoY; higher interest costs hurt
The non micro-irrigation segments also did well in aggregate in 4Q with
revenues rising 20%YoY. High raw material costs hurt, though, with Ebitda
falling 10%YoY. Higher interest expenses (+39%YoY) also hurt in 4Q due to
rising interest costs on short term debt as well as higher bill discounting
charges. Overall core PBT rose 16%YoY in 4QFY11 with net profits dampened
due to a forex loss and exceptional provisions as well as a higher tax rate.
Lower working capital QoQ but irrigation receivables rise further
Core working capital remained flat QoQ at Rs24bn despite higher sales
implying that core working capital fell 22 days QoQ. We note that was led by
higher payables (+Rs3.7bnQoQ) and lower inventories (-Rs1.8vn QoQ).
Receivables rose Rs1.8n QoQ (Rs4.5bn before discounting) with debtors in
micro-irrigation actually rising ~30 days QoQ to 372 days. Net working
capital, after discounted receivables (Rs9.8bn), fell 50 days QoQ to 150 days.
Earnings changes; maintain BUY
The adverse Rs4.3bn change in working capital in FY11 pulled standalone FCF
to a negative Rs2.8bn implying that net gearing remains high at 1.6x. We are
cutting FY12-13 EPS by 2-4% to reflect higher interest but note that Jain
expects quicker payments by the government as mandated in the 2010
guidelines, higher receivables discounting and the gradual ramp-up of the
proposed NBFC to help moderate working capital intensity. A rebound in FCF
will be key allowing the stock to reflect the strength of the secular multi-year
micro-irrigation investment theme. Maintain O-PF with a target of Rs250.
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