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Key beneficiary of micro-irrigation (MIS) potential
MIS holds tremendous potential as out of the total 140mn hectares
of arable land, only about 50% is rain-fed. Government has also
accorded significant priority to micro-irrigation schemes (increase in
subsidy to 60% from 40% for small farmers and marginal farmers
and 50% for farmers with up to 5 hectares of holding) as part of its
reforms in agriculture output. With only 4mn hectares covered under
drip irrigation and sprinklers, we believe despite the strong growth
over the past few years, we think a considerable opportunity still lies
ahead. Jain Irrigation, a dominant player with 55% share, derives
nearly half of its revenues from micro-irrigation and is likely to be a
key beneficiary of the inherent micro-irrigation potential; we factor
in a robust 30% growth in MIS in FY12.
New pipe sub-segments to drive growth
Jain Irrigation has traditionally operated in the PVC pipes business
(~19% of FY11 revenues) used for sanitation, rain-water harvesting
and electrical insulation. We expect strong demand to continue on
the back of various government-led infrastructure initiatives for safe
drinking water, rural/urban sanitation and water conservation.
Additionally, the company now offers different applications for pipes,
ranging from those used in city gas distribution networks, sewage &
waste disposal and telecom cables. Although telecom demand may
be muted, increased demand from city gas distribution companies
would drive growth in this sub-segment.
Expect 20% growth in agro-processing biz in FY12
Agro processing (onion & mango processing), hitherto a small part of
revenues, has gained size post a slew of organic and inorganic
initiatives and now forms ~15% of topline with focus on overseas
markets. We factor in a healthy 20% growth in agro-processing
revenues in current fiscal while a fall in onion prices could aid margin
in the onion-dehydration business.
Valuations appear attractive; recommend BUY
We expect MIS to deliver strong performance aided by various
initiatives from the central government; management has guided for
30% yoy growth in micro-irrigation in the current year. Further,
subdued polyethylene prices could translate into higher EBITDA
margins. Valuations appear attractive at 18x FY13 PE.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key beneficiary of micro-irrigation (MIS) potential
MIS holds tremendous potential as out of the total 140mn hectares
of arable land, only about 50% is rain-fed. Government has also
accorded significant priority to micro-irrigation schemes (increase in
subsidy to 60% from 40% for small farmers and marginal farmers
and 50% for farmers with up to 5 hectares of holding) as part of its
reforms in agriculture output. With only 4mn hectares covered under
drip irrigation and sprinklers, we believe despite the strong growth
over the past few years, we think a considerable opportunity still lies
ahead. Jain Irrigation, a dominant player with 55% share, derives
nearly half of its revenues from micro-irrigation and is likely to be a
key beneficiary of the inherent micro-irrigation potential; we factor
in a robust 30% growth in MIS in FY12.
New pipe sub-segments to drive growth
Jain Irrigation has traditionally operated in the PVC pipes business
(~19% of FY11 revenues) used for sanitation, rain-water harvesting
and electrical insulation. We expect strong demand to continue on
the back of various government-led infrastructure initiatives for safe
drinking water, rural/urban sanitation and water conservation.
Additionally, the company now offers different applications for pipes,
ranging from those used in city gas distribution networks, sewage &
waste disposal and telecom cables. Although telecom demand may
be muted, increased demand from city gas distribution companies
would drive growth in this sub-segment.
Expect 20% growth in agro-processing biz in FY12
Agro processing (onion & mango processing), hitherto a small part of
revenues, has gained size post a slew of organic and inorganic
initiatives and now forms ~15% of topline with focus on overseas
markets. We factor in a healthy 20% growth in agro-processing
revenues in current fiscal while a fall in onion prices could aid margin
in the onion-dehydration business.
Valuations appear attractive; recommend BUY
We expect MIS to deliver strong performance aided by various
initiatives from the central government; management has guided for
30% yoy growth in micro-irrigation in the current year. Further,
subdued polyethylene prices could translate into higher EBITDA
margins. Valuations appear attractive at 18x FY13 PE.
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