Maintain BUY on J. Kumar Infraprojects - Margin miss - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities

JKIL reported 4QFY21 revenue/EBITDA/APAT beat/(miss) of 4%/(23%)/(45%). Whilst revenue was ahead of expectation, APAT underperformed on margin contraction. JKIL highlighted that the second wave of the pandemic impacted execution from Feb-21 onwards, with labour reducing to 70%. The revenue shortfall has led to fixed price under absorption. Commodity prices also contributed to lower margins. Excluding the other bank balances (mostly margin money), net debt reduced to INR 4.9bn from INR 6.1bn in Mar-20. While the order backlog is robust at 4.3x FY21 revenue, near-term execution challenges have alleviated now to a large extent with labour coming back from late May-21. We maintain BUY on JKIL with a target price of INR 209/sh (7x Mar-23E EPS) and revise FY22E/FY23E EPS estimates by 10.6/10.5% to account for lower margins.

Mixed financial performance: Revenue: INR 9.9bn (+13%/+21% YoY/QoQ, 4% beat); EBITDA: INR 1bn (+13% YoY, -10% QoQ, 23% miss); EBITDA margin of 10.5% (+5/-363 bps YoY/QoQ, vs 14.2% est.) was affected by higher commodity costs and fixed price under absorption on INR 1bn revenue shortfall. Interest cost was INR 292mn, (+18% YoY, +19% QoQ). APAT: INR 327mn (+5.5% YoY, -23% 2QFY21, 45% miss). JKIL generated operating cash flow of INR 3.7bn and free cash flow of INR 2.9bn in FY21. It has revised revenue guidance to INR 30-35bn for FY22E vs INR 35bn earlier on account of unpredictable COVID wave. EBITDA margin guidance for FY22E remained unchanged at 14-16%.

Order book healthy; INR 40-45bn inflow targeted for FY22E: Total order book as on FY21 stood at INR 109.3bn (4.3x FY21 revenue). While metro projects contribute ~54% to the order book, flyover, bridges and roads projects contribute ~44%. FY21 order inflows stood at INR 22.3bn. With an L1 position in INR 13bn Mumbai Metro order, JKIL is confident of achieving INR 40bn guidance for FY22E.

Stable leverage and NWC: Gross debt reduced YoY to INR 5.6bn (-Rs 1.4bn YoY, net D/E 0.26x), driven by INR 2.4bn of FCFF generation. JKIL has incurred Capex of INR 1.3bn in FY21. We expect debt to remain stable at current levels.

Shares of J.KUMAR INFRAPROJECTS LTD. was last trading in BSE at Rs.176.95 as compared to the previous close of Rs. 176. The total number of shares traded during the day was 41004 in over 1437 trades.

The stock hit an intraday high of Rs. 179.85 and intraday low of 176. The net turnover during the day was Rs. 7280752.

Source : Equity Bulls

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