J. Kumar Infraprojects - 3QFY17 Result Update - Decent Performance on Execution Ramp-up - Reliance Securities

Aided by pick-up in construction activities post monsoon and revenue flow from metro projects, J Kumar Infraprojects (JKIL) has reported a healthy performance in 3QFY17. Its revenue surged by ~21% YoY and ~20% QoQ to Rs3.63bn. While EBITDA grew by ~25% YoY & ~14% QoQ to Rs567mn on healthy revenue growth, margin expanded by 46bps YoY to 15.6%. Net profit grew by ~10% YoY and ~16% QoQ to Rs265mn. Contrary to estimate, slow progress in execution of JNPT projects (due to utilities shifting issues) was the only setback, which is expected to ramp-up in ensuing quarters. Robust current order book of Rs97bn (6.6x TTM revenue) provides healthy business visibility. We envisage strong revenue booking from metro projects in 4QFY17E and FY18E due to construction pick-up in all three metro projects, which will aid JKIL to book ~Rs2.0bn revenue in 4QFY17E & Rs14.0bn in FY18E with margin to the tune of ~16-17% (guided by JKIL). Though we have trimmed down our earnings estimates by 14% and 7% for FY17E and FY18E, respectively on delay of some key projects, we maintain our positive view on the stock owing to robust order book, execution credentials, consistent focus on high-margin projects in limited geographies and superior management bandwidth. We reiterate our BUY recommendation on the stock with a revised Target Price of Rs270 (13x FY18E EPS).

Healthy Revenue Booking Aids Performance

Despite delay in full fledged execution in JNPT projects, JKIL's revenue grew by 21% YoY and 20% QoQ to Rs3.63bn, aided by revenue flow from new metro projects with execution ramp up post extended monsoon. EBITDA grew by ~25% YoY & ~14% QoQ to Rs567mn and margin expanded by 46bps YoY to 15.6%.

Order Book Remains Robust; Best-in-Class Book-to-Bill Ratio

JKIL's order backlog - including three metro projects worth ~Rs67bn bagged in current fiscal - which stands at Rs97bn as of 3QFY17 (6.6xTTM revenue) offers visibility for promising growth. Being selective in fresh bidding and optimum works in hands, JKIL now intends to focus on execution. It aims an order inflow worth Rs20-25bn in FY18E.

Outlook & Valuation

Though the issues with BMC appear to have subsided now, we continue to maintain our positive view on JKIL on the backdrop of healthy growth potential owing to strong order book, less leveraged (D/E at 0.1x), superior margins and proven execution credentials. We envisage JKIL to report 19% and 23% CAGR in revenue and net profit, respectively over FY16-FY18E. We reiterate our BUY recommendation on the stock with a revised Target Price of Rs270 (13x FY18E EPS).

Shares of J.KUMAR INFRAPROJECTS LTD. was last trading in BSE at Rs.223.8 as compared to the previous close of Rs. 227.3. The total number of shares traded during the day was 17373 in over 393 trades.

The stock hit an intraday high of Rs. 227.75 and intraday low of 220.5. The net turnover during the day was Rs. 3897859.

Source : Equity Bulls

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