Buy Jyoti Structures Ltd.
CM Price 160.05
Target 175
Jyoti Structures Ltd. (JSL) has registered a strong growth in its top line as well as bottom line for the period ended 31st Dec 2009. We attended the concall of Jyoti Structures. Some of the key points pertaining to results and discussed in the concall are summarized below:
Key Highlights of Q3FY10 & 9MFY10 Results
• During Q3FY10, JSL posted net sales of Rs.5087.2 mn, registering a growth of 18.2% YoY. Its EBITDA grew by 14.9% YoY to Rs.560.3 mn and EBITDA margins decreased by 32 bps YoY to 11.0%. Its Interest cost remained flat at Rs. 186.2 mn and depreciation increased by 86.4% YoY to 41.6 mn. Its PBT (including other income) grew by 18.3% YoY to Rs. 366.3 mn. APAT stood at Rs. 233.6 mn registering a growth of 29.4% YoY.
• During the 9MFY10, TRIL’s sales increased by 16.8% to Rs.14630.4 mn, its EBITDA increased by 8.5% to Rs.1594.4 mn, whereas its EBITDA margins de‐grew by 83 bps to 10.9%. Its APAT increased by 13.5% YoY to Rs.666.3 mn. 72% of its revenues were contributed by transmission, 13% by sub‐station and 15% by rural electrification.
Exploring opportunities in BOOT/BOOM projects
• JSL has bid for a BOOT project floated by RRVPNL (Rajasthan Rajya Vidyut Prasaran Nigam) along with SREI finance. It is also bidding for a similar project in Haryana. This bid will open on 2nd May 2010. The company would be forming a JV for bidding of these projects. The strategy behind this JV would be to get a large EPC opportunity from the JV company.
Strong orderbook and order pipeline provides strong visibility
• JSL has an order book of Rs.40,300 mn which has remained flat on a QoQ basis. It has received order inflow of for Rs.6810 mn during the Q3FY10 and apart from this it is also L‐1 in orders worth Rs. 2000 mn. Out of the total order inflow, 30‐35% are from Power Grid and the rest from various SEB’s like TNEB, UP Chattisgarh etc.The orderbook consists of 95% Domestic orders and 5% export orders. Further, 68% of orderbook is from transmission, 12% is from sub‐station and 20% from rural electrification.
• The company has indicated that it is looking at a business of about Rs.70 bn out of which Rs.27 bn worth of orders are expected to be opened up by Power Grid, 25% orders from countries like Kenya, Mozambique and South Africa and rest from State level SEB’s
• Its JV Gulf Jyoti has an order book of Rs.7700 mn which is to be executed in 30 months. However orders worth Rs.4900 mn on Dubai Electricity and Water Authority (DEWA) Project II has been put on a slow burner.
• Its subsidiary Jyoti Structure Africa has an order book of Rs. 1,200 mn.
OUTLOOK & VALUATION
JSL has a strong order book position and a decent order pipeline, which gives a good business visibility for next 2 to 3 years. The Company has witnessed increasing competition with new fringe players and expects the pricing to remain under pressure for at least next few quarters. However, it is restricting its bids only in projects where it can maintain its EBITDA margins of 11‐11.5%. We had already factored this scenario into our expectations for FY10 & FY11. We have maintained our estimates for FY10 & FY11. We are introducing numbers for FY12 on back of the order pipeline. At the CMP of Rs.173, the stock is trading at 12x its FY11E & 10x its FY12E EPS of Rs. 14.5 & Rs. 16.9, respectively. We have valued JSL at Rs.204, i.e. 12x its FY12E Earnings. We maintain a BUY rating on the stock with a target price of Rs.204.
Report card
| Attribute | Value | Date |
|---|---|---|
| PE ratio | 17.82 | 02/02/10 |
| EPS (Rs) | 9.76 | Mar, 09 |
| Sales (Rs crore) | 512.09 | Dec, 09 |
| Face Value (Rs) | 2 | |
| Net profit margin (%) | 4.62 | Mar, 09 |
| Last bonus | 1:2 | 31/08/94 |
| Last dividend (%) | 45 | 15/05/09 |
| Return on average equity | 19.18 | Mar, 09 |
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SBICAP Securities Ltd has given a fresh call to Buy Jyoti Structures Ltd. with a target of Rs. 223
We are not revising our revenue and profitability estimates for FY10E and FY11E. At the CMP, JSL trades at a PE of 13.9x and 10.5x its FY10E and FY 11E earnings respectively.
We continue with our BUY rating and maintain our previous price target of Rs 223.