|Company||J. Kumar Infraprojects|
|Date of report||November 15, 2017|
|Target Price (Rs)||385|
JKIL reported soft performance in 2QFY18, with APAT coming in 12.1% below our estimates. The mining ban and quarrying issues have been resolved, and shall lead to a strong execution pick-up from 2HFY18E. The balance sheet remained stable, with net debt at Rs 4.2bn and net D/E at 0.29x.
JKIL is gearing up for upcoming biddings, after a pause during 1HFY18. The current order backlog (Rs 86.6bn, 4.5x FY18E rev) is robust, despite no new order wins during 1HFY18. We expect Rs 15-30bn/yr order inflows over FY18-20E. Land acquisition issues in JNPT road projects have been sorted out.
JKIL has underperformed peers over the last few quarters and further re-rating is contingent on earnings recovery. We have retained our FY18-20E financial estimates. Maintain BUY with a TP of Rs 385/sh (15x Sep-19E EPS).
Highlights of the quarter
– Weak execution impacted performance: JKIL has been facing hiccups since the start of JNPT/Metro projects with (1) Delays in utility shifting, and (2) Ban on quarrying. These issues have now been addressed, and will lead to a significant execution pick-up from 2HFY18E. We build in 20.9% FY18-20E rev CAGR.
– Balance sheet stable, net D/E at 0.29x: JKIL has net debt of ~Rs 4.2bn as of end-1HFY18. We have modelled for peak debt of Rs 5bn. JKIL has received ~Rs 8bn interest free mobilisation advances on Metro/JNPT projects, and this shall keep WC debt under control.
– Near-term outlook: JKIL’s re-rating is contingent on execution pick-up and new order wins from hereon. We remain constructive on the stock.