CMP: Rs. 222 | Rating: ADD | Target Price: Rs.406 | Upside: 83%
J Kumar Infraprojects Ltd (JKIL) Q1 FY19 revenue, at Rs. 618.42 crores, spurted 49% y-o-y with works picking up in Mumbai metro line 3 contributing ~42% of topline or ~ Rs. 260 crores in the first quarter.
EBITDA came in at Rs. 99.96 crores against Rs. 63.29 crores in Q1 FY18. PAT rose 55.66% y-o-y to Rs. 40.19 crores against Rs. 25.82 crores in Q1 FY18.
We opine to HOLD the stock and assign a target of Rs. 406 based on a PE multiple of 12.5 times our FY20 PAT estimate of Rs. 246 crores and EPS of 32.5 implying an upside of 78% from current levels of Rs. 228 in 12 – 18 months timeframe.
1. Financial Highlights
Even though JKIL has a weaker H1 revenues as compared to H2 revenues on accounts of monsoon, the company reported robust topline at Rs. 618.42 crores demonstrating their execution capabilities. Line 3 (underground metro) contributed the most ~ Rs. 260 crores (42% of the topline) while, JNPT contributed Rs. 125 crores (20% of the topline) followed by line 2 & 7 at Rs. 95 crores (15% of the topline). As Mumbai receives the most precipitation in Q2, we expect line 3 topline contribution to be little subdued in the next quarter.
Depreciation increased to Rs. 25 crores in Q1 FY19 against Rs. 21.84 crores in Q4 FY18 and is expected to remain constant going forward. Finance cost has increased to Rs. 21.50 crores as net debt has increased to Rs. 700 crores at the end of Q1 FY19. Management has guided the debt levels will remain constant at Rs. 700 crores in FY19 and FY20.
Management still sticks to a conservative outlook and has guided for Rs. 2,300 – 2,400 crores topline in FY19 and for Rs. 2,700 crores topline in FY20. However, as seen in FY18, where the management had guided for Rs. 1800 crores topline but executed Rs. 2050 crores, we believe similar instances will reoccur in the future.
2. Order Book position
As of 11th August, 2018 JKIL has an outstanding order book worth ~ Rs. 9,850 crores including orders worth Rs. 1,522 cores disclosed recently. The recent orders won include construction of ward area in SGPGI, Lucknow for Rs. 176.65 crores; Pune metro rail project for Rs. 388.58 crores; metro link express in Gujarat for Rs. 90 crores and Mumbai metro line 6 for Rs. 867.75 crores. Out of the 3 packages in Mumbai metro line 6, JKIL has bagged the biggest package which involves development of 5 elevated metro stations between lokhandwala and kanjurmarg in Mumbai.
Management has guided to have a comfortable order book position between Rs. 10,000 – 12,000 crores going forward, which translates into 5 times the revenue of FY18 of Rs. 2050 crores. Given the execution capabilities of the company, JKIL can comfortably manage an order book size up to Rs. 15,000 crores.
3. Outlook and Valuation
A firm management, bulging order book and niche presence in urban infra space makes us positive on JKIL. With 23% plus CAGR revenue growth and 33% CAGR EPS growth in FY19 – FY20, JKIL is trading at an attractive valuation of 7x FY20 earnings. We recommend to ADD the stock with the revised target price of Rs. 406 implying a gain of 83% from the current levels of Rs. 222.
Read our complete coverage thread on JKIL here: https://bit.ly/2KSRJJH
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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