Buy Jain Irrigation; target Rs 207: Unicon Investment

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Buy Jain Irrigation; target Rs 207: Unicon Investment

Unicon Investment is bullish on Jain Irrigation Systems (JISL) and has recommended buy rating on the stock with a target price of Rs 207 in its August 17, 2011 research report.

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Unicon Investment is bullish on Jain Irrigation Systems (JISL) and has recommended buy rating on the stock with a target price of Rs 207 in its August 17, 2011 research report.

"Jain Irrigation Systems (JISL) posted strong numbers in Q1 FY12. Total revenue grew by 31% YoY to INR 9,521mn. Micro Irrigation segment (MIS) registered a revenue growth of 31.5% YoY driven by volume growth of 17%, led by Delhi, Gujarat, Karnataka and HP. Order book also increased by 15% to ~INR 5bn in the quarter. The management expects this segment to post a healthy growth of 30% in FY12. PVC pipes segments showed a marginal growth of 3.4% due to high raw material prices. Agro processing segment outperformed the expectations registering a growth of 115% on YoY basis. This performance was led by processing of totapuri mangoes. Dehydrated vegetable segment also showed a healthy growth of 28.3% in topline."

"EBITDA increased by 48% YoY to INR 2,156mn while EBITDA margin expanded by 257bps to 22.7% in the quarter. JISL has an order book size of INR 9.3bn with INR 5bn, INR 1bn and INR 3bn orders in MIS, pipes and agro segments respectively. MIS segment posted an EBITDA margin of 30.3% with 26% YoY growth in EBITDA. Agro processing segment showed an EBITDA growth of 123% to INR 324mn at an EBITDA margin of 28.4%. Dehydrated vegetable also registered a phenomenal 69% EBITDA expansion at ~28% EBITDA margin. Net Profit increased by 57.6% YoY to INR 824mn while net profit margin expanded from 7.2% to 8.7%. Interest cost for the company rose by 58% to INR 776mn."

"JISL expects to receive its entire outstanding subsidy, amounting to INR 2-3bn, in Q2 FY12. Besides this, it also expects to receive the NBFC approval from RBI by Dec 2011. This NBFC would allow JISL to disburse loans upto 75% its MIS sales. Hence, the management expects substantial reduction in its working capital requirements in FY13. JISL holds 55% market share in domestic MIS business. Increased govt focus towards food security (via farm yield) would help this segment register a strong robust growth of 25% till FY13E. At CMP of INR 167, stock is trading at 15.2x its FY12E earnings. We upgrade the stock to BUY with an 18 month price target of INR 207," says Unicon Investment research report.

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To read the full report click on the attachment