Published on 18/03/2017 10:29:10 AM | Source: Religare Securities Ltd

Accumulate Jain Irrigation Systems Ltd For Target Rs.120.00 - Religare Sec

Posted in Broking Firm Views - Short Term Report | #Jain Irrigation Systems Ltd #Irrigation #Trading Report #Religare Securities Ltd


Investment Rationale

* Jain Irrigation Systems Ltd. (JISL) is a market leader in domestic MIS segment with over ~50% market share. The company is among top 3 players in PVC & PE piping and the largest player in food processing in India. It is poised to benefit from higher spends on MIS and food processing by the government. PVC and PE pipe industry growth will be another key revenue driver for JISL. Also it has diluted its stake in food subsidiary JFFFL and raised Rs. 804 cr which will be used to reduce debt.

* It reported healthy Q3FY17 results, beating the demonetization woes. Net sales increased by 4.6% yoy, in the challenging demand environment. EBITDA and PAT increased by 27.7% yoy and 126.7% respectively. Prudent operating management and working capital efficiency led to margin improvement.

* The management has guided stronger Q4FY17E earnings as pent-up demand due to rupee demonetization will be catered in the quarter. JISL is focused on balance sheet deleveraging which will aid increase in net profitability.

 

Technical Outlook

* JISLJALEQS had a prolong corrective phase post stock split in 2010 and retested its major support zone around 45 level twice during that phase. Though it made a recovery attempt in 2013 and covered significantly from the bottom to roughly 130, but failed to hold around that zone and again retraced to monthly support zone.

* In early 2016, it again rebounded strongly from that area with noticeable rise in volume and touched 100+ levels in October 2016, after forming rounding bottom pattern on the weekly chart, which is bullish reversal in nature.

* Currently, it has been consolidating in a narrow range while holding strongly above the long term averages on multiple time frames. And, now it looks all set for a fresh up move. Participants, with short to medium term view, should accumulate in the given range of 93-96 with close below stop loss of 84 for the target of 120.

 

Recommendation

Accumulate Jain Irrigation Systems Ltd @ 93-96 Stoploss 84 Target 120 CMP 94.60

 

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