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Jain Irrigation Systems Ltd Underweight
JAIR.BO, JI IN
Q1FY12 results beat; but key concerns remain
JI reported 1Q standalone results ahead of expectations driven by improving MIS
sales in new markets and lower overheads. There is some improvement in working
capital, but absolute levels of ~220 days still remain high and remain a drag on
cash flows and capital efficiency. Maintain UW.
Pick up in MIS revenues. JI reported 1Q MIS growth of 31.5% YoY driven by
growth in sales in Gujarat, Karnataka and HP. Management indicated MIS
order book improvement of 15% yoy to ~Rs5B in 1Q. Management noted that
irrigation projects (complete irrigation solutions) business is scaling up with
sales of Rs700MM and order book of Rs1.3B at end of 1Q. Management has
guided at MIS growth of 30% for FY12.
Working capital improving at the margin, but still high at ~220 days. Gross
receivables from MIS improved to 349 days (from 369 days at end of Mar-11)
and overall receivables improved to 244days from 263days over the same
period. Management indicated that fund release by Maharashtra govt. over next
month and new NMMI policy to release central and state subsidy separately
should further aid receivables. JI has guided to bring down MIS gross
receivable days to 300 by end-FY12.
NBFC to become operational by 3Q. IFC has picked up 10% stake in NBFC
and management will look to offload another 30% to strategic stakeholders
once NBFC becomes operational. JISL stake would be restricted to 40%.
Management indicated that they have applied to RBI for a licence and expect to
become operational by 3QFY12.
Q1 result highlights. Revenues +29% YoY driven by growth in MIS +31.5%
YoY, Agro processing +80% YoY and piping +4% YoY. EBITDA margins
improved 120bps on account of lower overheads and better mango and onion
prices vs. Q1FY11. Net Income +58% YoY.
Remain UW: JI stock has corrected by 33% over past 12 months and now
trades at 18.1x FY12E P/E. With balance sheet concerns still not fully
addressed, continued investments in non core areas (solar business) and
uncertainty over NBFC are likely to be key overhangs in the near term. While
things are improving at the margin, we would like to see sustainable
improvement in balance sheet and capital allocation before turning more
constructive. Maintain UW with PT of Rs165.
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
Q1FY12 results beat; but key concerns remain
JI reported 1Q standalone results ahead of expectations driven by improving MIS
sales in new markets and lower overheads. There is some improvement in working
capital, but absolute levels of ~220 days still remain high and remain a drag on
cash flows and capital efficiency. Maintain UW.
Pick up in MIS revenues. JI reported 1Q MIS growth of 31.5% YoY driven by
growth in sales in Gujarat, Karnataka and HP. Management indicated MIS
order book improvement of 15% yoy to ~Rs5B in 1Q. Management noted that
irrigation projects (complete irrigation solutions) business is scaling up with
sales of Rs700MM and order book of Rs1.3B at end of 1Q. Management has
guided at MIS growth of 30% for FY12.
Working capital improving at the margin, but still high at ~220 days. Gross
receivables from MIS improved to 349 days (from 369 days at end of Mar-11)
and overall receivables improved to 244days from 263days over the same
period. Management indicated that fund release by Maharashtra govt. over next
month and new NMMI policy to release central and state subsidy separately
should further aid receivables. JI has guided to bring down MIS gross
receivable days to 300 by end-FY12.
NBFC to become operational by 3Q. IFC has picked up 10% stake in NBFC
and management will look to offload another 30% to strategic stakeholders
once NBFC becomes operational. JISL stake would be restricted to 40%.
Management indicated that they have applied to RBI for a licence and expect to
become operational by 3QFY12.
Q1 result highlights. Revenues +29% YoY driven by growth in MIS +31.5%
YoY, Agro processing +80% YoY and piping +4% YoY. EBITDA margins
improved 120bps on account of lower overheads and better mango and onion
prices vs. Q1FY11. Net Income +58% YoY.
Remain UW: JI stock has corrected by 33% over past 12 months and now
trades at 18.1x FY12E P/E. With balance sheet concerns still not fully
addressed, continued investments in non core areas (solar business) and
uncertainty over NBFC are likely to be key overhangs in the near term. While
things are improving at the margin, we would like to see sustainable
improvement in balance sheet and capital allocation before turning more
constructive. Maintain UW with PT of Rs165.
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