Reiterate BUY on JMC Projects - Some hits, some misses - HDFC Securities

Mr. Parikshit D Kandpal, Institutional Research Analyst, HDFC Securities

JMC Projects (JMC) reported in-line revenue at Rs 10.7bn (+15%/+32% YoY/QoQ). However, EBITDA/APAT missed our estimate by 20%/41% as the additional cost related to labour transportation and higher commodity prices impacted margin. YTD order inflow stood at Rs 75bn, taking the order book to Rs 142bn (ex. L1 of Rs 7.5bn). We remain constructive on JMC, given (1) a healthy order book (~4x FY20 revenue) and (2) comfortable balance sheet. We reiterate BUY with an unchanged target price of Rs 110. We have cut our FY21 estimate to incorporate the miss on margin in 3QFY21. Key risks: (1) delay in restructuring/monetisation of BOT assets and (2) increase in leverage.

Execution recovery achieved: JMC reported revenue at Rs 10.7bn (+15%/+32% YoY/QoQ), driven by robust execution in Infrastructure and Buildings & Factories (B&F) segments. EBITDA came in at Rs 1bn (-7%/+31% YoY/QoQ) and was impacted by additional cost incurred on labour transportation and higher commodity prices. Consequently, APAT came in at Rs 257mn (-34% YoY), 41% less than our estimate. With COVID challenges receding, margin is expected to revert to normal in 4QFY21. Management has guided for double-digit topline growth for FY22, which we believe is achievable, given the strong order book.

YTD order inflow at Rs 75bn: JMC has received orders of Rs 75bn so far in FY21, driven by orders in commercial B&F and water segment. The company is also L1 in orders worth Rs 7.5bn, on course to achieve its guidance of Rs 60bn to Rs 80bn inflow for the year. Excluding the L1 orders of Rs 7.5bn, the order book stands at Rs 142bn (~4x FY20 revenue). B&F and Infrastructure constitute 55% and 38% of the order book respectively.

Sharp reduction in net debt; BOT asset restructuring progressing well: Standalone net debt reduced to Rs 6.6bn from Rs 8.1bn at the end of Sep 2020 on better collections and working capital management. The company expects debt to remain at a similar level in FY22. Toll collections in road assets improved from Rs 5.2m per day in 2QFY21 to Rs 6.1m per day during the quarter. Basis management commentary, the restructuring process of two of the BOT road assets (Wainganga and Kurukshetra Expressway) is in an advanced stage. JMC is hopeful of concluding the process by 1QFY22.

Shares of JMC PROJECTS (INDIA) LTD. was last trading in BSE at Rs.74 as compared to the previous close of Rs. 76.2. The total number of shares traded during the day was 40944 in over 457 trades.

The stock hit an intraday high of Rs. 78 and intraday low of 73.7. The net turnover during the day was Rs. 3138472.

Source : Equity Bulls

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