Buy Jyoti Structures; target of Rs 78: Angel Broking

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Buy Jyoti Structures; target of Rs 78: Angel Broking

Angel Broking is bullish on Jyoti Structures and has recommended buy rating on the stock with a target of Rs 78 in its October 26, 2011 research report.

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Angel Broking is bullish on Jyoti Structures and has recommended buy rating on the stock with a target of Rs 78 in its October 26, 2011 research report.

"Jyoti Structures (JSL) reported a subdued performance for 2QFY2012 mainly on account of higher interest cost. The company's revenue and EBITDAM were broadly in-line with our estimates. However, higher-than-anticipated increase in interest cost led to disappointment on the earnings front. Increased interest costs have adversely impacted JSL's profitability since the past few quarters mainly on account of stretched working capital requirements and increasing interest rates. Steady project execution resulted in revenue growth of 16.5% yoy to Rs 632.1cr (Rs 542.3cr) for 2QFY2012, which was in-line with our expectation of Rs 618.3cr. EBITDA margin witnessed a contraction of ~88bp yoy to 10.8%, in-line with our expectation. Interest costs soared by 49.9%/15.0% yoy/qoq, higher than our expectation, resulting in the bottom line declining by 10.9% yoy to Rs 22.1cr (Rs 24.8cr), against our estimate of Rs 25.2cr."

"The overall slowdown in the power sector has left transmission EPC companies to reel under pressure as order inflows have slackened. In-line with this, the JSL stock has fallen by ~28% and underperformed the BSE Sensex by ~18% over the last three months. At the CMP of Rs 60, the undemanding valuations (3.9x and 0.6x on PE and PB basis; well below its historic PE multiple average of 13.0x), a 13% CAGR earnings story and reasonable return ratios (~20%) make JSL's stock attractive at current levels. Hence, we continue to maintain our Buy rating on the stock, albeit with a revised target price of Rs 78 by assigning a reasonable multiple of 5.0x to its FY2013E EPS of Rs 15.5," says Angel Broking research report. 

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To read the full report click on the attachment