Buy J.Kumar Infra; target of Rs 345: CD Equisearch

With an eye on Brihan Mumbai Municipal Corporation (BMC) elections slated for Feb 2017, the Maharashtra Government has drawn out plans to launch infrastructure projects worth Rs 1 lakh crore ($15 bn) this year. Projects to be unveiled include Mumbai coastal road, Mumbai Trans Harbour Link, Mumbai metro expansion port and jetty construction, solid waste management et al. The work orders on one of the most ambitious projects the Rs 17500 crs ($2.6 bn) Mumbai Trans Harbour Link (MTHL) - 80% funded by Japan International Cooperation Agency (JICA) -would be awarded by October for completion by 2019. For Rs 13000 crs coastal roads, the RFQs (request for qualification) were recently issued. What's most heartening is that MMRDA's budget for 2016-17 is the highest ever - Rs 6647 crs vs Rs 3830 crs a year ago.

The stock currently trades at 14.7x FY17e EPS of Rs 16.29 and 11.8x FY18e EPS of Rs 20.31. The stock's relegation in last few months stemmed from JKIL’s miserable order execution and unexpected delay in award of Mumbai L3 orders. Though order execution is expected to trump over the next two years, but risks (particularly external) cannot be undone. Yet Maharashtra's grand infrastructure plans cannot be gainsaid either. JKIL stands out for its ability to execute complex projects and forge JVs, hastening influx of awe-inspiring Mumbai Metro orders. On balance, we maintain our 'buy' rating on the stock with revised target of Rs 345 (previous target: Rs 437) based on 17x FY18e earnings (peg ratio: 1) over a period of 9-12 months. 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.