Buy Jain Irrigation Systems; target of Rs 129: Centrum

Centrum's research report on Jain Irrigation Systems

Jain Irrigation Systems Ltd (JISL), for Q1FY19 on a consolidated basis, reported good numbers. Revenue grew 24% YoY to Rs2,092 crore, with better growth across business segments – Hi-Tech Agri Input products (48% of Q1FY19 revenue) up 17%, Plastic (28%) up 15% and agro processing (22%) up 39%. EBITDA grew 15% to Rs270 crore, with margins contracting by 101bps to 12.9%, due to high value inventory in the food business. Higher other income (impact of Rs30 crore due to mark to market - MTM gain on listed bond in Singapore), led to net profit growth of 84% to Rs82 crore. As per JISL, net debt increased by 13% YoY to Rs4,579 crore due to acquisition cost and currency volatility as of 30 Jun’18. Net working capital improved by 14 days YoY to 157 days, as of 30 Jun’18.

Outlook

We maintain our Buy rating with a target price of Rs129 (14x FY20E EPS).