Jyoti Structures - 4QFY2013 Result Update - Angel Broking

For 4QFY2013, Jyoti Structures (Jyoti)'s top-line performance was much better than our estimates, growing by 27.5% yoy to Rs. 939cr on account of strong execution. However, PAT declined by 29.3% yoy to Rs. 22cr, primarily on account of elevated interest costs (since increase in receivables led to higher working capital borrowing). Jyoti's interest coverage multiple remains under stress, declining from 2.0x in 4QFY2012 to 1.6x presently.

Healthy order backlog: The company reported a healthy order inflow of Rs. 1,100cr in 4QFY2013, taking its total order backlog to Rs. 4800cr, implying an order backlog to sales ratio of 1.7x. The order backlog is spread across transmission (79%), substation (10%) and rural electrification (11%) segments. Client-wise, the backlog mainly comprised of orders by PGCIL (27%), West Bengal (17%), Maharashtra (12%), Madhya Pradesh (6%) and overseas (25%). The company reported good ordering from countries such as Egypt, Kazakhstan, Kenya and Namibia, among others, which boosted its overseas segment's contribution to order book. The Management has guided at an order visibility of ~6,000cr for 1QFY2014.

Deteriorating working capital cycle remains key concern: The debtor days continue to be as high as 230 days, mainly due to pending receivables to the tune of ~Rs. 400cr plus from Maharashtra, Tamil Nadu and Rajasthan discoms. In light of the deteriorating working capital cycle (higher levels of working capital borrowing), we expect interest costs to remain elevated going forward. The Management expects increase in focus on overseas business and execution of some of the slow-moving domestic orders to aid in improving the company's working capital cycle.

Outlook and valuation: The company is witnessing improvement in execution and has a healthy order book, but the deteriorating working capital cycle remains the key concern. We believe, interest cost will remain at elevated levels going forward, dragging Jyoti's profitability. Therefore, we recommend a Neutral rating on the stock, even though the stock is currently trading at a cheap valuation of 2.6x our FY2015E EPS.

Source : Equity Bulls

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