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Research
Jyoti Structures - 1QFY2013 Result Update - Angel Broking
Posted On : 2012-08-04 08:07:44( TIMEZONE : IST )
Jyoti Structures (Jyoti)'s revenues for 1QFY2013 came in line with our expectations at Rs.654cr, up 2.5% yoy. However the company disappointed on the margins front; the EBITDA came in at Rs.64cr, 5.3% lower than our expectation. Jyoti's revenue growth continued to be dismal, consistent with its performance over the past few quarters. The EBITDA margin contracted by 120bps on account of the tough competition prevalent in the sector and stood at 9.8% for the quarter. We expect the company to continue to operate at these levels over the coming quarters. The interest cost was lower than expected and it declined by 16% qoq. However the company's interest coverage multiple remained under stress, declining from 2.6x in 1QFY2012 to 1.9x presently. The other income was also lower than expected leading to a dismal bottom-line. The PAT came in at Rs.17cr, declining 33.7% yoy and 18.8% below our expectations. On the back of cheap valuations we maintain our Buy rating on the stock.
Order flows remain stable: The Power Grid Corporation of India Ltd (PGCIL) order flow is expected to retain traction over the coming quarters; we therefore see order inflows to remain stable. Jyoti's order backlog stood at Rs.4,600cr up 2.9% yoy. However the company's order coverage has been declining over the past few quarters. Its order backlog was spread across transmission (55%), substation (18%) and distribution (27%) segments. Client-wise, the backlog mainly constituted of orders from PGCIL (33%), West Bengal (16%), Maharashtra (14%), Madhya Pradesh (7%) and the private sector (5%).
Outlook and Valuation: We maintain our revenue and order inflow estimates; however, we reduce our margin estimates leading to a decline of 3.2% and 2.7% for EBITDA and 20% and 2.5% at the PAT level for FY2013 and FY2014 respectively. The stock is currently trading at 2.9x on our FY2014E EPS. We assign a multiple of 4.5x (~33% discount to KEC's multiple) to arrive at a target price of Rs.59. We maintain our Buy recommendation on the stock.
