JMC Projects - Strong growth visibility - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

JMC Projects (JMC) reported revenue of INR 11.2bn (+2.4x/+5.5% YoY/QoQ), 6% below our estimate. However, EBITDA/APAT missed our estimate by 7/21% on higher commodity prices, revenue mix and COVID-related expenses. The order inflow was robust at INR 46.5bn, taking the order book (OB) to an all-time high of INR 159bn. The road assets were affected by COVID and farmers agitation, with daily collection declining to INR 4.5mn (vs INR 5.3mn in Q4FY21). JMC rerating may continue, given (1) an all-time high order book (~4x FY21 revenue); (2) potentially stronger balance sheet, post restructuring of BOT assets by Q3FY22; and (3) likely growth outperformance on the back of robust order backlog. We upgrade our FY22/23 EPS by 5.6/9.2% and roll forward our valuation to Jun-23E. We reiterate BUY with an increased target price of INR 149 (11x Jun-23E EPS, INR 11/sh for BOT assets).

Q1FY22 financial highlights: JMC reported revenue of INR 11.2bn (+2.4x/+5.5% YoY/QoQ), driven by robust execution across all segments. EBITDA, at INR 806mn, was impacted by higher commodity prices, job mix and COVID-related expenses. APAT, at INR 162mn (-2.7x YoY), was 38% below our estimate. Management has guided for 15-20% topline growth in FY22, which we believe is achievable, given the robust OB. 90% of the orders in the OB are variable pass-through contracts.

Order book at all time high: JMC received orders of INR 46.5bn in Q1FY22, with which the order book stands at INR 159bn. L1 orders stand at INR 25bn, comprising mainly of water infra and international B&F orders. JMC guided for INR 75-80bn of order inflow in FY22. The pipeline looks robust with INR 500bn each in water, urban infra and international segments.

BOT assets resolution closer: Standalone net debt increased to INR 7.2bn (net D/E 0.69x) from INR 5.1bn at the end of Mar-21. JPC is targeting net debt at INR 5bn by the end of FY22. The Waiganga-Kurukshetra expressway restructuring is expected to complete by Sep-21 and the sale of Vindhyachal asset would be complete by Dec-21. JPC invested INR 530mn in Q1FY22, taking the total investment in four BOT assets to INR 9.3bn, of which an INR 280mn would be reversed after the WEPL-KEPL restructuring completes.

Shares of JMC Projects (india) Ltd. was last trading in BSE at Rs. 118.8 as compared to the previous close of Rs. 116.15. The total number of shares traded during the day was 86171 in over 2840 trades.

The stock hit an intraday high of Rs. 120.15 and intraday low of 112.45. The net turnover during the day was Rs. 10044959.

Source : Equity Bulls

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