Buy Jyoti Structures; tgt Rs 167: Emkay

6867 Investors following Jyoti Structure. Share this News with them.

0

Like this story, share it with millions of investors on M3

Buy Jyoti Structures; tgt Rs 167: Emkay

After taking into account the earning downgrades and PE contraction, we maintain our BUY recommendation on the scrip with downgraded target price of Rs 167 (from Rs 261) At our target price, the scrip discounts FY09E and FY10E diluted EPS by 15x and 11x respectively.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Buy HCC; tgt Rs 125: Emkay Buy Exide Ind; tgt Rs 88: Emkay Reduce ACC with target of Rs 525: India Infoline Taj GVK an market performer: India Infoline Buy SBI, tgt Rs 1661: Religare ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about Jyoti Structure See messages about Jyoti Structure Jyoti Structure BSE | NSE 28/05/12 Are Mutual Funds betting on Jyoti Structure?

Emkay Research has maintained buy recommendation on Jyoti Structures with revised price target of Rs 167, in its report dated 31st July, 2008.

"During Q1FY09, the net sales of the company grew at 35.4% on year on year basis to Rs 4106.3 million on better execution of orders. The topline contains 66% contribution from transmission contracts followed by 20% from substation and 14% from rural electrification contracts. 33% of the total revenue were from exports, 2% from deemed exports and the rest 65% were domestic revenue. During the quarter, JSL reported 35.7% growth in the production of transmission tower on year on year basis.

EBITDA during the quarter grew by 30.8% on y-o-y basis with a decline of 42 basis points over corresponding quarter of last year. The EBITDA margins remained lower on account of higher raw material expenses as a percentage of net sales. Most of the contracts carries price variation clause, hence the impact of rise in raw material prices is being passed on by the company. The management expects to maintain EBITDA margins at 12%.

PAT during the quarter grew by 28.1% to Rs 205.4 million with 5.11% of margin. The bottomline growth got affected on account of higher interest cost. The average cost of long term borrowing for the company increased from 9.5% to 9.8%. We expect the same to go up further on account of rising interest rate scenario. The management expressed its concern on rising cost of borrowing which affects the PAT margin of the company. JSL reported Q1FY09 fully diluted EPS of Rs 2.5 with year on year growth of 27.5%.

The company has a strong consolidated order book of Rs 35.6 billion which is 2.5x FY08 net sales and is to be executed in the next 18-24 months. During the quarter, the order intake stood at Rs 5.51 billion. The order book comprises 65% from transmission, 20% from rural electrification and 15% from sub-stations. 14% of the orders are from exports and 8% are from deemed exports. The order book includes Rs 2420 million of orders for its subsidiary, Jyoti Structures Africa and Rs 1600 million of orders for its JV, Gulf Jyoti.

The order book position of the company is expected to remain strong as the announced tenders for which the company has bid for includes, transmission contracts of Rs 8500 million, rural electrification of Rs 8100 million and international orders of Rs 24000 million. In addition, the company is L1 in contracts worth Rs 4000 million. With this, the management expects 30-35% growth in net sales to be maintained in the coming quarters.

JSL has planned for Rs 600 million of capex in FY09 for buying machineries and cranes funded through debt. It is raising Rs 300 million of loans from IDBI at 10.5%".

Valuation:

"We have revised our financial estimates for the company by factoring in the impact of higher material cost, employee cost and interest cost. The topline estimates have been upgraded marginally by factoring in higher raw material cost, most of which is being passed on and lower excise duty (as % of gross sales) on the orders. But we have downgraded the bottomline estimates by taking into account the impact of higher employee cost, material cost and interest cost. With this, we have downgraded our EPS estimates for FY09E and FY10E by Rs 2 to Rs 11.1 and Rs 15.2 respectively. Currently the scrip discounts FY09E and FY10E diluted EPS by 10.8x and 7.9x respectively and thus, available at an attractive valuation. But looking at the changing macro-economic scenario and PE contraction taking place across large cap scrips, we have taken a conservative approach in assigning PE multiple on the scrip. After taking into account the earning downgrades and PE contraction, we maintain our BUY recommendation on the scrip with downgraded target price of Rs 167 (from Rs 261) At our target price, the scrip discounts FY09E and FY10E diluted EPS by 15x and 11x respectively".

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decissions.