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JKIL reported strong set of numbers with net profit rising 95.09% to Rs. 54.78 crores in Q4FY18 as against Rs. 28.08 crores during Q4FY17. Gross revenue rose 72.8% to Rs. 902.31 crores as against Rs. 522.22 crores during the same quarter last year. Strong order book and on field checks of execution coupled with fixed margins enhances PAT visibility, Also valuation of 7.14 times FY20 is very reasonable and has a good margin of safety.
We opine to continue to HOLD the stock if held already and if not initiate a fresh BUY. We assign a target of Rs. 422 based on a PE multiple of 11.3 times our FY20 PAT estimate of Rs. 283 crores and EPS of 37.4 implying an upside of 57% from current levels of Rs. 268 in 12 – 18 months timeframe.
1. Financial Highlight FY18 gross revenue grew by 27.8% to Rs. 2,050.71 crores and PAT grew by 27.2% to Rs. 136.55 surpassing our expectations of Rs. 122.3 crores of profits for the same year. Strong execution capabilities demonstrated in Q4 along with delayed billing in Q3 to an extent of ~ Rs. 100 crores helped boost the topline to Rs. 912.18 crores in Q4 FY18. EBITDA margins came in lower at 13.2% in Q4 FY18 and 15.7% for the year on account of consolidation of numbers under Ind AS 111 on joint arrangements to an extent of Rs. 150 crores of Delhi work. Going forward, the company seems confident on maintaining its EBITDA margins at ~17% as none of the EPC projects are bid where the margins are suppressed.
2. Order Book Update The current order book stands at ~ Rs. 8,484 crores comprising of Rs. 7,480 crores of previous orders and Rs. 1,005 crores of new orders in Q4 FY18. The new orders won this quarter include Rs. 559 crores for construction of South Delhi Municipal Corporation headquarter, Rs. 222 crore for Pune metro rail project and Rs. 223 crores for improvements of flyover in Ghatkopar, Mumbai. JKIL has already bid for 7 additional projects of Rs. 4,500 crores of which it has received L1 status (lowest bidder) for Chunapur Delhi work of Rs. 180 crores. The company is planning to participate for other key projects which include Mumbai metro line 5, line 6 & extension of line 7, Mumbai – Ahmedabad high speed rail, medical colleges in north and MMRDA flyover & bridges. JKIL would require winning another Rs. 1,500 crores worth of orders this year in order to maintain a comfortable order book position.
3. Guidiance for FY19 The management has guided Rs. 2,300 – 2,400 crores topline in FY19 and Rs. 2,600 – 2,700 crores topline in FY20. In spite of the management having the band width to execute beyond the guided topline, they opt to be conservative to the investor community which depicts a positive picture of them. The official timeline for completion of line 2 & 7 is 2019 which has been delayed by 6 months whereas; the official timeline for line 3 is January, 2021 which has been delayed by 4 months. Such delays in execution are acceptable as these are huge government projects and are not worrisome. JKIL is targeting Rs. 750 crores of revenue from line 3, Rs. 640 crores from line 2 & 7 and Rs. 450 crores from JNPT project in FY19. Ind AS 111 would have an effect of Rs. 40 crores additional revenue in FY19 while having no impact of the margins going forward. Trade receivables are down by Rs. 14 crores as against Rs. 100 crores guided by the management in Q3 FY18. It stands at Rs. 528 crores (94 days) as on March 2018 and is a crucial number to be looked at in the coming quarters.
4. Other Key Points CAPEX – JKIL did a capex of Rs. 336 crores in FY18 due to outright buying of the 2 TBM’s (tunnel boring machines) and is planning a capex of Rs. 100 crores in FY19. TBMs – Out of 5 TBMs allotted for metro line 3, 2 TBMs have already started contributing to the topline with 1 TBM excavating 500 meters and another one 250 meters. 3rd and 4th TBMs are expected to be lowered by next month and by July all the 5 TBMs are expected to be working.
Disclaimer This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are accurate and opinions given are fair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way be responsible for the contents. The Company, its Directors, Officers or Employees may have a position or may otherwise be interested in the investment referred in this document. This is not an offer or solicitation to buy, sell or dispose off any securities mentioned in this document. Copyright © 2017 Pankaj Mangaldas Securities pvt. ltd. , All rights reserved. Registered Office 701, PJ Tower, Dalal Street, Mumbai - 400023 Corporate Office 411 Atlantic Commercial Tower, R.B Mehta road, Ghatkopar (E), Mumbai – 400077 Get in touch: +91 (22) 2501-2333 | info@pmsec.in | www.pmsec.in
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