Jyoti Structures - 2QFY2013 Result Update - Angel Broking

Jyoti Structures (Jyoti)'s 2QFY2013 performance was below our expectations, with the top-line declining by 6.2% yoy to Rs.593cr. The company's EBITDA came in at Rs.57cr, 15.8% lower yoy. The EBITDA margin contracted 111bps following tough competition in the sector and is presently at 9.7%. Jyoti's interest coverage multiple remains under stress, declining from 2.6x in 1QFY2012 to 1.6x presently. The increase in receivables has led to higher working capital borrowing, elevating the interest cost. Consequently, the PAT declined by 46.0% yoy to Rs.12cr.

Strong order inflow: The company reported a strong order inflow of Rs.801cr in 2QFY2013. The order flow from Power Grid Corporation of India (PGCIL) is expected to retain traction; we therefore see order inflows for Jyoti to remain stable. Jyoti's order backlog stood at Rs.4,800cr up 9.7% yoy. However the company's order coverage has been lower at 1.7x over the past few quarters. The order backlog was spread across transmission (60%), substation (25%) and distribution (15%) segments. Client-wise, the backlog mainly constituted of orders by PGCIL (29%), West Bengal (15%), Maharashtra (12%), MP (6%), overseas (15%) and the private sector (5%). The company received major orders from Kenya and Uganda which boosted its overseas segment's contribution to the top-line.

Outlook and valuation: Jyoti's robust order book and recent focus to scale up its overseas operation to insulate itself from domestic headwinds will benefit the company in the medium to long term. The stock is currently trading at 3.7x our FY2014E EPS. Given the attractive valuations, we maintain our Buy rating on the stock, assigning a multiple of 4.5x FY2014E EPS, to arrive at a target price of Rs.53.

Source : Equity Bulls

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