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J. Kumar Infraprojects Ltd. Q3 FY18 Result Update and Con Call KTA

CMP: 329 | Rating : BUY | Target: 444 in 12 – 18 months | Upside: 35% | Date: 19/02/2018

Our Take:

JKIL’s Q3 results posted a y-o-y growth of 23.29% in top line & 24.06% in bottom line. However, Q3 FY18 topline of Rs. 462 Cr was below our expectation of ~ Rs. 550 Cr due to a delay in the billing of some completed work. On our interaction with Mr. Navin Gupta (MD) and Mr. Arvind Gupta (CFO) they confidently guided a top-line of Rs.1700-1800 Crs. which we believe is fairly achievable based on our estimations too.

We have a BUY rating on the stock. We assign a P/E multiple of 12x FY20E earnings and arrive at a target price of Rs.444 / share implying an upside of 35% from current levels in 12-18 months time frame. Read JKIL IC dated: 05/02/2018.

Earnings Call KTA

Mumbai Metro work accelerates

Mumbai Metro executions of Line 2, 3 and 7 along with JNPT project helped grow the topline by ~23% and PAT by ~24% in Q3 FY18. These metro lines are expected to pick up the pace in Q4 as there was a delay in the execution of these projects by around 3 months from the previous timeline. A lag is acceptable as these are huge government projects. Management’s guidance of revenue ~ Rs. 1800 – 1900 Cr in FY18 and ~ Rs. 2300 Cr in FY19 indicates a strong belief in the future growth of the company. Q3 FY18 topline of Rs. 462 Cr was below our expectation of ~ Rs. 550 Cr due to a delay in the billing of some completed work. In general, JKIL is billed one month after its completion. We expect an increase in Q4 revenue to ~ Rs. 704 Cr on account of delayed Q3 payments and milestones clearly defined going forward from Q4.

The account receivable still remains high at Rs. 542 Cr in Q3 FY18 due to initial phase of underground metro line 3 and is worrisome. Management has guided to reduce debtors number by ~ Rs. 100 Cr in Q4 and is a crucial number to look forward to as high debtor number would translate to profits on book but not in hand.

Order Book Outlook

The order book as on 31st December 2017 stood at Rs. 8220 Cr. with a marginal order inflow in 9M FY18 of Rs. 238 Cr. JKIL has not bid aggressively in the last few quarters due to sizeable order book in existence. A key factor to look out for is JKIL’s bidding for Metro Line 5, 6 and 7 (extension) projects in Mumbai, also Delhi Metro Phase-IV, Ahmadabad and Surat Metro Projects. For order book to remain robust at ~Rs. 8000 Cr for the coming few years, JKIL should win Rs. 2000 – 3000 Cr worth of orders, as a huge part of order book is expected to be executed starting from Q4 FY18. Bidding for Metro Line 2B and 4 were allotted to Simplex Infrastructure Ltd and Reliance Ltd, with new entrants seen in the bidding process thereby stiffening the competition. Line 5, 6 and 7 can grow order book by ~Rs. 1500 Cr with tenders expected to be out in next 2 months.

Firm Margins

The EBITDA Margins at current levels of ~18% are fixed by the nature of contract and shall continue to stay the same thus aiding visibility. The ownership of equipment’s and projects location in the hometown of the company provide better synergies. JKIL bought 2 TBM’s and 22 Hydraulic Machines in 9M FY18 and has 96.5% of its outstanding orders located in Maharashtra thereby aiding the margins further.

Rating Index:

Rating Action

BUY Buy the stock at current price

SELL Sell the stock at current price

HOLD Continue to hold the bought stock

ADD Increase the holding only of these shares have been bought previously


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