Buy J Kumar Infraprojects; target of Rs 885: Religare

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26 Aug, 2025 12:21

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Religare’s research report on J Kumar InfraprojectsModest revenue growth: JKIL reported 10% YoY revenue growth to Rs 3.3bn for the quarter. The civil segment contributed 40% of Q2 revenues at Rs 1.3bn while the transportation segment contributed 56% at Rs 1.85bn. Management reiterated its FY16/FY17/FY18 revenue guidance of Rs 16bn/Rs 20-22bn/Rs 27-28bn.Adverse product mix affects margins: EBITDA margins dropped 246bps YoY to 18.3% (RCMLe: 18.5%) on account of a 724bps YoY increase in raw material cost (as a percentage of sales), which was partially offset by a 210bps/ 214bps YoY reduction in labor costs/other expenses. The change in material cost can be explained by a higher share of the comparatively low-margin civil segment in the execution mix.Robust order inflows buoy order book: JKIL booked Rs 10.65bn of new orders in Q2, taking the order book to Rs 36.8bn. Further, the company stands L1 in Rs 55.9bn worth of projects (including Rs 52.4bn pertaining to Mumbai Metro Line III). Mumbai Metro work is expected to start in Jan’16 with revenue booking only in FY17.Strong order pipeline: Management sees a strong pipeline of ~Rs 1,000bn of works to be bid for in the Mumbai Metropolitan Region (MMR) alone, including: (1) Mumbai Metro works for Rs 350bn, (2) Coastal road project for Rs 130bn, and (3) Mumbai Trans Harbour Link for Rs 120bn. In addition, there are metro projects in other cities such as Pune, Nagpur and Ahmedabad.Outlook and Valuation JKIL’s Q2FY16 revenue/EBITDA were in line with estimates (+10% YoY/-3% YoY to Rs 3.3bn/Rs 606mn), while PAT was ahead (+15% YoY to Rs 232mn) on account of lower interest expenses. The order backlog now stands comfortably at Rs 36.8bn and JKIL is the lowest bidder (L1) in another Rs 56bn worth of projects (incl. Mumbai Metro Line III). We believe the company has a well-capitalised balance sheet, especially after the recent Rs 4.1bn QIP, and the quality of its order backlog would sustain profitability. Maintain BUY.For all recommendations, click hereDisclaimer: 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.

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