JKIL reported lower losses (at Rs 208 vs Rs 599mn expectation) owing to better execution and cost controls. COVID-19 led to company reporting 25Q low execution. High urban order book exposure (~91%) and labour migration halted execution during first half of 1QFY21. Since then, labour availability has improved from 20% to 60% and sites are seeing execution rampup with near normalisation expected by 3QFY21 (30-40% run rate currently). Whilst order backlog is robust at (4.2x 1-yr trailing revenue), near term execution challenges have sprung up as Metro/Tier-1 cities are the worst impacted due to COVID-19 in terms of labor migration. At 4.9x FY22E EPS, 1HFY21 losses/execution disappointment is already priced in. We maintain BUY. Key risks (1) Geographic concentration (2) Order conversion within estimated timelines (3) Prolonged monsoon.
OutlookHowever, with the rampup in execution from 3QFY21, gross debt levels may increase to Rs 6-6.5bn. JKIL expects NWC to be at 125days for FY21 vs 144days in FY20.
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