J. Kumar Infraprojects - Execution pace to pick up; Buy - Anand Rathi

Clear revenue visibility. Consequent on the strong order inflows in FY13, we expect execution to pick up in the following 2-3 quarters in some of J. Kumar Infraprojects' major projects (Sion-Panvel and DMRC). Moreover, the Delhi Metro Rail Corp. (DMRC) project picked up speed during the quarter. For 3QFY14, we expect the company to post 19% yoy revenue growth (29.3% qoq).

Strong operating margins. Its present order book factors in healthy margins of over 16% in all projects. For the quarter, we expect a 17.5% EBITDA margin, vs 16.9% in the Dec'12 quarter and 18.2% in Sep'13 quarter. In the next 3-4 quarters, the margin is likely to be healthy because of the larger contribution from the DMRC project. As debt on the company's books is low (net-debt-to-equity: 0.2x), we expect a 7.3% net profit margin.

Smart pickup in order book. In 1HFY14, the company bagged orders of Rs. 1.7bn, taking its order book to Rs. 34bn (3.3x TTM revenue). Further, at the L1 stage, it has orders of ~Rs. 9bn in the Mumbai Water Transport project. A bid pipeline of over Rs. 60bn and the company's focus on cash contracts in urban infra are likely to increase inflows in FY14-15.

Our take. We expect J. Kumar's 3QFY14 revenue to grow 19% yoy (29% qoq), following strong execution in its Sion-Panvel and DMRC projects. We expect a 17.5% EBITDA margin and a 7.3% net profit margin. Key monitorables are the company's orderbook and the status of its L1 projects. Our price target of Rs. 295 is based on a PE of 8x FY15e and an EV/ EBITDA of 4.5x. Risk. Delay in project execution.

Source : Equity Bulls

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