Accumulate Jyoti Structures; target of Rs 47: PLilladher

Prabhudas Lilladher is bullish on Jyoti Structures and has recommended accumulate rating on the stock with a target of Rs 47 in its May 28, 2012 research report.

“Jyoti Structures (Jyoti) reported sales growth of 2% YoY at Rs7.35bn for Q4FY12, marginally above our expectation of Rs6.8bn. However, execution narrowed on account of Right of Way (ROW) issues and delay in delivery to customers like TNEB and DVC due to payment concerns. EBITDA margin was down by 40bps YoY at 11.2%. However, sequentially it has improved by 110bps QoQ. Also, it is above our expectation of 10.2% majorly on account of reduced raw material cost as % of sales by 400bps YoY at 50.3%. Interest cost increased by 22% YoY at Rs405m (due to increase in debt). Decrease in tax rate by 750bps YoY helped report PAT of Rs315m (just down by 10% YoY), better than our expectation of Rs 211m.”

“The current order book stood at Rs43.3bn, down by 4.5% YoY. The break-up of order book in terms of segment is: 60% Transmission line (~Rs25.98bn), 20% Substation (~Rs8.66bn) and 20% Rural electrification (~Rs8.66bn) orders. In terms of client, Power Grid contributed 40% (~Rs17.32bn) of the order book, Madhya Pradesh Rural Electrification projects 7% (~Rs3.03bn), Private 6% (Rs2.59bn) and rest 31% (~Rs13.4bn) from other SEBs like Chhattisgarh, DVC, West Bengal, Rajasthan, Assam and Punjab. The company received fresh orders worth Rs7.7bn in Q4FY12, a decrease by 30% YoY. The pipeline of tenders to be opened over the next 2-3 months was ~Rs65bn (PGCIL ~Rs45bn, other domestic orders ~Rs15bn and international markets ~Rs5bn). Pipeline of new tenders coming up for bidding was ~Rs46bn (Power Grid Rs39bn and others worth Rs7bn). The company highlighted that though the bid of some of the marginal players are not being opened, the pricing levels have still not improved in the domestic markets.”

“The stock is currently trading at 4.3x FY13E. We believe that the stock will be under pressure, given slower execution, higher interest cost, over dependence on Power Grid’s orders stressed out balance sheet and increasing competition. Effective working capital management will be the key trigger. We maintain ‘Accumulate’ rating on the stock,” says Prabhudas Lilladher research report. 

Public holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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 decisions.

To read the full report click on the attachment

Read More