Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jain Irrigation Systems Ltd
Underweight
JAIR.BO, JI IN
FY11 Results: Balance sheet deterioration + pared
growth outlook = Stock de-rating; cut PT to Rs165
• Further balance sheet deterioration in FY11: Based on standalone FY11
results, we note that a large proportion of incremental revenues in FY11
stand out as receivables. JI’s revenues in FY11 increased by Rs6.4B over
FY10, while receivables in FY11 rose by Rs6.05B over FY10; i.e. 95% of
incremental sales are yet to be realized to cash. Overall, debtor days in
FY11 increased to 159 from 115 in FY10. While the situation may not be as
bad on a consolidated basis (subsidiary results have not been published yet),
directionally we still see deterioration.
• Expect growth rates to moderate, impending margin pressures:
Management guided to 30% growth for MIS, but pared expectations on
growth for food processing business to 10%-15%. Exports are slowing
which is likely to put pressure on overall growth. Management expects
overall sales growth of 20%-21% in FY12. Raw material cost pressures are
building up owing to high oil prices, and management indicated that
margins could come under pressure if oil prices do not come off.
• NBFC likely to commence by Aug-Sep ’11: JI would invest Rs1B in the
NBFC, while another Rs1B will be invested by third parties. Management
indicated that the NBFC would start ramping up only in 4Q FY12E.
• 4Q results in line with our estimates, but below consensus: 1) Sales: Up
27% yoy, driven by strong 42% growth in domestic MIS, though MIS
exports de-grew 10%yoy; 2) EBITDA margins at 21.3%, up 50bp on
account of operating leverage; 3) interest costs up 39%yoy on higher
working capital; 4) PAT (pre-exceptional) up 28% yoy.
• Expect further de-rating, cut PT to Rs165: We believe that JI will de-rate
further in light of the deterioration in the balance sheet and impending
growth and margin headwinds. We reduce our Mar-12 PT to Rs165, based
on 15x FY13E P/E (from Rs175 earlier based on 18x FY12E P/E). Our
target multiple is at a 25% discount to JI’s historical trading average, but still
at a 50% premium to domestic agri-input players. Key upside risks: adoption
of MIS in canal-irrigated and cereal producing areas; change in govt.
subsidy policy and faster growth in food processing and overseas businesses
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jain Irrigation Systems Ltd
Underweight
JAIR.BO, JI IN
FY11 Results: Balance sheet deterioration + pared
growth outlook = Stock de-rating; cut PT to Rs165
• Further balance sheet deterioration in FY11: Based on standalone FY11
results, we note that a large proportion of incremental revenues in FY11
stand out as receivables. JI’s revenues in FY11 increased by Rs6.4B over
FY10, while receivables in FY11 rose by Rs6.05B over FY10; i.e. 95% of
incremental sales are yet to be realized to cash. Overall, debtor days in
FY11 increased to 159 from 115 in FY10. While the situation may not be as
bad on a consolidated basis (subsidiary results have not been published yet),
directionally we still see deterioration.
• Expect growth rates to moderate, impending margin pressures:
Management guided to 30% growth for MIS, but pared expectations on
growth for food processing business to 10%-15%. Exports are slowing
which is likely to put pressure on overall growth. Management expects
overall sales growth of 20%-21% in FY12. Raw material cost pressures are
building up owing to high oil prices, and management indicated that
margins could come under pressure if oil prices do not come off.
• NBFC likely to commence by Aug-Sep ’11: JI would invest Rs1B in the
NBFC, while another Rs1B will be invested by third parties. Management
indicated that the NBFC would start ramping up only in 4Q FY12E.
• 4Q results in line with our estimates, but below consensus: 1) Sales: Up
27% yoy, driven by strong 42% growth in domestic MIS, though MIS
exports de-grew 10%yoy; 2) EBITDA margins at 21.3%, up 50bp on
account of operating leverage; 3) interest costs up 39%yoy on higher
working capital; 4) PAT (pre-exceptional) up 28% yoy.
• Expect further de-rating, cut PT to Rs165: We believe that JI will de-rate
further in light of the deterioration in the balance sheet and impending
growth and margin headwinds. We reduce our Mar-12 PT to Rs165, based
on 15x FY13E P/E (from Rs175 earlier based on 18x FY12E P/E). Our
target multiple is at a 25% discount to JI’s historical trading average, but still
at a 50% premium to domestic agri-input players. Key upside risks: adoption
of MIS in canal-irrigated and cereal producing areas; change in govt.
subsidy policy and faster growth in food processing and overseas businesses
No comments:
Post a Comment