Accumulate Jain Irrigation; target of Rs 75: KRChoksey

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KRChoksey's report on Jain Irrigation Systems

"JISL Q3FY15 Consolidated revenue of Rs 1,290 crore (-11%, YoY) is below to our expectation of Rs 1,484 crore and EBITDA Rs 149 crore (-12.7%, YoY) vs our expectations of Rs 183 crore. Standalone revenue Rs 856 crore (-11%, YoY) and EBITDA Rs 122 crore (-15%, YoY), the revenue product mix is MIS Rs 349 crore (-11%, YoY), Onion Rs 26 crore (+46%, YoY), Fruit Rs 116 crore (18%, YoY), PVC Sheet Rs 35 crore (-40, YoY), PVC Pipe Rs 169 crore (-11%, YoY), Solar Rs 21 crore (-41%, YoY) & other Rs 18 crore. The business revenue drops due to fall in realizations as raw material cost (Crude) fell and customers also defer their purchase decision in order to get products at stable prices. Company has booked Rs 18 loss as inventory devaluation for pipe business. Further, retail MIS business fell as regions like Maharashtra, Karnataka & MP hails untimely storm. Regions like Nashik, Vidharbha and Marathwada faced drought."

Valuations & Outlook:"At CMP Rs 66, the stock is trading at EV/ EBITDA of 8.2x & 7.2x for FY16E & FY17E financials respectively. Considering the leadership position of JISL, it is a natural beneficiary with the investment in agriculture sector. The Q3FY15 has impact on MIS and pipe business which we expect to be stable in FY16E. We recommend “Accumulate” with TP of Rs 75", says KRChoksey research report.

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