Buy Jaihind Projects; target of Rs 280: Sunidhi Securities

“Jaihind Projects (JPL) incorporated in 1985, the Ahmedabad-based Jaihind Projects is an engineering, procurement & construction (EPC) company focused on the hydrocarbons, water & infrastructure sectors. It provides EPC services ranging from oil & gas (onshore and near-shore/marshy pipelines, tankages & terminals, horizontal directional drilling, micro tunnelling/boring, onshore & offshore fabrication), process (refineries), civil infrastructure (water supply & sewerage, turnkey, rail), thermal power plants, etc. JPL has a central equipment maintenance and repair workshop and storage facilities in Motera, on the outskirts of Ahmedabad, Gujarat. This facility also caters to other remote workshop and repair locations. JPL has a strategic tie-up with Tehran Jonoob (EPC contractor in the Middle East) and Arabian Pipeline Projects.”

“JPL owns one of the largest fleet of pipeline equipment in the country (including large number of sidebooms, pipe bending machines, horizontal directional drilling rigs/machines and other earth moving heavy equipment). It has supplied and laid over 14000 km. of various pipes including water supply & sewerage system projects. JPL undertakes the construction of cryogenic to floating and fixed roof storage tanks of double or single wall for hydrocarbons, and concrete storage tanks for water and operates in closer proximity of its ongoing projects. It owns one of the largest fleet of pipeline equipment in the country (including large number of sidebooms, pipe bending machines, horizontal directional drilling rigs/machines and other earth moving heavy equipment).”

“It uses sophisticated asset maintenance, repair and operations software solution to manage its workshop and fleet of equipment to ensure reliability. Clientele speaks volumes about the quality and timely completion of projects: L & T, Cairn Energy, Gujarat State Petronet, GAIL, Reliance Industries, IOC, BPCL, HPCL, CPPL, ONGC, Gujarat State Petroleum, Hindustan Zinc, and Essar Oil, Kalpataru, Adani Group, Lanco Group etc. JPL expects tremendous growth in near future in domestic and international markets as number of projects is expected in the coming quarters.”

“JPL has bidded orders worth Rs 1500 crore domestically & Rs 500 crore internationally. Orders in hand as on date stood at around Rs 900 crore; 2.2x FY10 sales. Of the total order-book, nearly ~33% is from water segment while ~67% is from hydrocarbon segment. JPL would be bidding for Rs 1000 crore pipeline project between Dabhol–Bangalore. There is a total proposed investments of more than Rs 200 billion in developing and expanding the existing pipeline network in India over next 3 to 4 years, adding up to more than 10, 000 km of additional cross-country natural gas pipeline across the country. Further, more than 60 cities are earmarked to get CGD (city gas distribution) networks by FY12 along with proposed implementation of National Gas Grid by GAIL and capacity expansion of the LNG terminals, the demand for natural gas pipelines is slated to grow.”

“The forecast reveals that the gas market will expand at a CAGR of 17% for 2009-13, driven by new finds and the expansion of LNG infrastructure. India’s hydrocarbon potential is still latent, with almost one-third of the area still unexplored or poorly explored. The situation has improved in recent years, especially since the launch of the NELP. There appears to be large ready demand, as 70% of requirements are met by imports. It is also forecasted that global refining capacity will increase at a CAGR of 2.2% for 2010-13, compared with the forecast of an oil-demand CAGR of 1.3% over the same period. All these are business accretive for JPL.”

“According to Ministry of Water Resources and National Commission on Integrated Water Resources Development (NCIWRD) estimates, demand for water is likely to increase at a CAGR of ~1.5% and ~1.3%, respectively, from 2010 to 2050. The peculiarity in the case of water is that supply driven by the hydrological cycle remains constant, while demand follows a linear path, driven by population growth, industrial growth, and change in lifestyle. Thus water-related projects have great potential.”

“JPL is all set to benefit tremendously, being a preferred pipeline contractor due to its expertise, experience, large equipment base and cost effective solutions. JPL is likely to post an EPS of Rs 35 in FY11 and Rs 47 in FY12. At the CMP of Rs 219, the share is trading at a P/E of 6.2x on FY11E and 4.7x on FY12E. We recommend BUY with a target of Rs 280 in the medium term,” says Sunidhi Securities research report.

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