Buy JMC Projects (India) Ltd.
TARGET Rs.260
CM PRICE Rs.153.95
JMC Projects India Limited (JMC), a subsidiary of Kalpataru Power Transmission Limited (KPTL), in one of the fast growing construction company of India. It is into the construction of Industrial, Power, Institutional and Infrastructural sector. We recently had a Telecon with the management of the company to discuss its Q3FY10 performance & outlook going forward & present herewith the key takeaways:‐
Key Highlights of Q3FY10 & 9MFY10 Results
• During Q3FY10, its revenues increased by 8.4% YoY to Rs. 3386.2 mn. In the same period,its EBIDTA increased by 11.7% YoY to Rs. 259 mn, while its EBIDTA margins increased by 20 bps YoY to 7.6%. During the quarter, its APAT increased to Rs. 82.1 mn, registering a growth of 42.8% YoY.
• During 9 months of FY10, the Company’s revenues were almost flattish at Rs.9440.1 mn, its EBIDTA increased marginally by 3% to Rs. 726 mn, while the EBIDTA margins have increased by around 30 bps to 7.7%, its APAT was almost flattish at Rs. 204.2 mn. It registered an EPS (on expanded equity post the proposed rights issue) of Rs. 9.4 for 9 months FY10.
Strong Order book position
• JMC’s order book position outstanding as on December 31, 2009 stood Rs. 26000 mn. The average execution period of the order book is around 24 months. In addition to its current order book, JMC is L1 in 2‐3 orders (worth Rs. 2000 mn to Rs.3000 mn each), which might get finalized soon.
• The order book of Rs. 26000 mn comprises of around 55% of industrial & building projects, around 27% of power projects and the balance 18% of infrastructure projects. The L1 tenders comprises of projects in the infrastructure space.
OUTLOOK & VALUATION
JMC Projects is one of the leading construction companies in India. It is engaged into EPC projects with specialization in designing, testing and tower fabrication. The overall outlook of the construction industry looks positive in view of the huge spending happening in the sector, both by the government as well as the private sector. JMC has a decent order book position & also has a strong order pipeline and is well placed to leverage its strengths & Kalpataru Group’s positioning in the infrastructure business. retained After considering its 9 months FY10’s performance and based on our interaction with the management, we have revised our estimates of FY10 & FY11. While we have reduced our FY10 Revenues & APAT estimates, we have re‐retained our FY11 APAT estimates considering JMC’s strong orderbook and improved margins scenario. We now expect its revenues to be almost flattish in FY10E & increase by 20% in FY11E. Its EBIDTA is expected to fall marginally by 3.3% in FY10E and increase by 31.7% in FY11E, its APAT is expected to be flattish at Rs.369.8 mn in FY10E and increase by 52.8% in FY11E and its EPS (on expanded equity post the proposed rights issue) is expected to be Rs.17 in FY10E and Rs.26 in FY11E. At the current market price of Rs.159, the stock is available at an attractive valuation of 9.4x its FY10E earnings of Rs.17 and 6.1x its FY11E earnings of Rs.26 We retain our “BUY” rating on the stock with a price target of Rs. 260 (10x FY11E EPS).
Report card
| Attribute | Value | Date |
|---|---|---|
| PE ratio | 7.94 | 03/02/10 |
| EPS (Rs) | 20.26 | Mar, 09 |
| Sales (Rs crore) | 338.62 | Dec, 09 |
| Face Value (Rs) | 10 | |
| Net profit margin (%) | 2.79 | Mar, 09 |
| Last bonus | 1:2 | 02/12/00 |
| Last dividend (%) | 20 | 29/05/09 |
| Return on average equity | 19.94 | Mar, 09 |
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