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Strong execution with stellar margins

Our view

J. Kumar Infraprojects Ltd (JKIL) reported a strong set of numbers with revenues and margins coming in above our estimates, led by robust execution across the projects. JKIL has secured projects worth ~Rs17bn in 1HFY23, expanding the order book to Rs114bn and translating into an order book?to?sales ratio of 2.8x TTM revenues. JKIL has already bided for metro and bullet train projects worth Rs60bn and plans to further bid for projects worth Rs700?750bn in FY23E. On the back of strong order book, healthy bid pipeline and robust execution, management has guided for revenue growth of 15?20% in FY23E and 15% growth in FY24E with strong operating performance (EBITAM of 14?15%) to continue going forward. The balance sheet continues to be robust with increased gross debt at Rs4.5bn (D/E at 0.2x). On the working capital front, debtors have been stretched by Rs1.3bn to Rs10.2bn (vs Rs8.9bn in FY22) of which ~Rs2.8bn have been collected in Oct`22.  

A strong track record of executing roads, bridges, structural buildings, urban infrastructure such as metro, railways, subways and skywalks, JKIL stands strong led by a) healthy order book with increasing ticket size, b) strong execution capabilities, c) controlled debt levels and d) robust EBITDA margins. We have introduced our FY25E estimates with revenue / PAT growth of 17% / 27% YoY owing to healthy order book. We have revised our rating from ADD to BUY with an unchanged TP of Rs388 valuing the company at 9x its FY24E thereby implying an upside potential of ~41% from the current levels.

Result Highlights

* For Q2FY23, JKIL’s revenues grew 31.2% YoY to Rs10.1bn (above our estimates of Rs8.8bn), on the back of strong execution across project sites.

* EBITDA grew 32.4% YoY to Rs1.5bn (above YSec estimate of Rs1.2bn) with EBITDAM came at 14.4% (above our estimates of 13.8%) due to stellar execution.

* On bottom?line front, adj. PAT was up 64.5% YoY and came in at Rs675mn (above our estimates Rs480mn) largely owing to better operating margins

* At the CMP, the stock trades at a P/E of 8.5x and 6.4x its FY23E & FY24E earnings.

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