Centrum's research report on Jain Irrigation
Jain Irrigation Systems Ltd (JISL) for Q2FY17 on a consolidated basis reported decent results for the second consecutive quarter, in line with our expectation. Revenue grew 9% YoY to Rs 1,441 crore, due of better growth across business segments. EBITDA margins expanded by 157bps to 13.3%. Net profit stood at Rs 28 crore (vs loss of Rs 5 crore in Q2FY16). The management has guided better growth in H2FY17 on the back of a good monsoon season, healthy order book and bid pipeline. For FY17, the management expects revenue growth of 12-14%.
JISL has been in the process of creating a sustainable business model over the last year. This has led to an improvement in its business resulting into better financial performance. Apart from the Micro Irrigation Systems (MIS), Food and Piping business, the company is looking at additional revenue drivers from the solar pump and food retail segment. Post our Q1FY17 result update (CMP: Rs 85 on Aug. 30 2016), the stock moved up and touched its 52 Week high of Rs 109 (Oct. 30, 2016). The current correction in the stock price (CMP: Rs 89) is due to the overall fall in the market. At CMP, the stock is trading at 10.9x P/E, on FY18E basis. Given the current quarter performance and anticipation of further improvement in financials, we expect valuations to sustain. We maintain our Accumulate rating and upgrade multiple to 13x (earlier 12x) on FY18E EPS giving a target price of Rs 105.
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