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Published on 15/12/2018 12:13:42 PM | Source: Emkay Global Financial Services Ltd

Update On J.kumar Infraprojects Ltd - Emkay

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Execution momentum to continue

* JKIL’s 2QFY19 standalone revenue grew 62.4% yoy to ~Rs5.2bn, ahead of our and consensus estimates, mainly due to the strong execution in its key metro projects (Delhi and Mumbai).

* JKIL’s EBITDA increased 48% yoy to Rs909mn, while APAT grew ~54% yoy to Rs354mn on strong execution witnessed in the quarter.

* JKIL has secured projects worth ~Rs14bn in 2QFY19, taking the order book to Rs92.8bn, translating into an order book-to-sales ratio of 3.7x FY18 EPC revenue.

* Recent interim order by SEBI are very serious in nature and have affected the credibility of the company. This will continue to be an overhang on the stock. Hence, we move our rating from a Buy to Under Review until further clarity arises on the issue.

* Strong execution; margins better than expected

JKIL’s 2QFY19 standalone revenue grew 62.4% yoy to ~Rs5.2bn, ahead of our and consensus estimates, mainly due to the strong execution in its key metro projects (Delhi and Mumbai Line 2, 3, and 7) and the JNPT project. JKIL’s EBITDA increased 48% yoy to Rs909mn, while OPM was 17.7% vs. our estimate of 15%. APAT grew ~54% yoy to Rs354mn on strong execution witnessed in the quarter.

* Healthy order book; robust revenue visibility

JKIL has secured projects worth ~Rs14bn in 2QFY19, taking the order book to Rs92.8bn, translating into an order book-to-sales ratio of 3.7x TTM EPC revenues. Despite strong order inflows and healthy execution, management maintained its revenue guidance of Rs23bn for FY19, with EBITDA margin in the range of 15-17%. New order inflows are expected to be on stream and come into execution in the next 6-8 months. Given the order book and 1HFY19 performance, we expect the company to meet its guidance both on the revenue and margin fronts.

* Outlook and valuations

Recent interim order by the SEBI are very serious in nature and have affected the credibility of the company. This will continue to be an overhang on the stock. In our view, for a company that is battling against a series of corporate governance issues over the last two years, such a development means significant headwinds going forward. Hence, we move our rating from a Buy to Under Review until further clarity arises on the issue. However, we do not expect JKIL’s execution to be affected by this development and maintain our earnings estimates for FY19-20. At the CMP, the stock trades at a P/E of 7.1x F19E EPS and 5.6x FY20E EPS and EV/EBITDA of 3.1x FY19E and 2.7x FY20 EBITDA.

 

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