Buy Jain Irrigation; target of Rs 100: Motilal Oswal

Motilal Oswal's report on Jain Irrigation Systems

"JI reported a revenue of INR12.9b (est. INR14.4b), YoY de-growth of 6%. While growth in Micro Irrigation (MIS) (-10.5% YoY) was weak due to lower farm incomes (impacted by untimely rains and drought in Maharashtra and lower agri commodity prices), PVC Pipes (-11.1% YoY) and PE Pipes’ (-29.4% YoY) demand was impacted due to weak offtake in a deflationary polymer price environment as buyers postponed purchases. On the positive side, Food processing business reported robust growth, with Onion dehydration growing 58.3% YoY and Fruit Processing growing 24.6% YoY."

"We expect strong free cash generation over FY15-17E led by domestic MIS business, which should aid to reduce the debt-equity from 1.8x in FY15 to 1.3x in FY17E. We cut the earnings estimates for FY16E/17E by 43%/29% respectively to reflect the lower-than-expected growth and margins. We expect growth and margins to recover in FY16 on the back of a normal monsoon and lower polymer prices. We maintain Buy, with a TP of INR100 (12x FY17E EPS)", says Motilal Oswal research report.

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