J Kumar Q1FY17 performance was broadly in-line with consensus estimates. Revenue increased 11% YoY to Rs 4.03bn led by contribution from JNPT road project. EBITDA margin declined by 164 bps YoY to 16.9% on account of higher construction & employee expenses. Thus, EBITDA increased by 1% YoY to Rs 680mn as the revenue growth was negated by decline in margins. Net profit increased 15.6% YoY to Rs 295 mn led by higher other income. Management states that the company has been de-registered from further bidding in BMC road segment but this wont impact execution of current order-book (which is at ~ 7x FY16 revenues). 

Outlook and Valuation: We expect that FY17-18E would be driven by execution of the large order backlog (~ Rs 100 bn including metro orders; ~7x FY16 revenues). However, we cut our revenue estimate by ~5%/~3% for FY17E/18E on account of delay in execution of the metro order. Our PAT estimates for FY17E/18E are getting revised downwards by 6.7%/5.7%. The stock has corrected by ~48% in the last 6 months after the BMC issue. However, management clearly states that it will not impact its ability to execute current order backlog (as MMDRA/MMRC has awarded Metro orders to JKIL post this issue). Valuation at 9.2x/6.5x on FY17E/18E earnings looks attractive post the recent fall and factors in most of the negative news flow. We reduce our target P/E multiple to 12x (from 13x) to value FY18E earnings (largely due to delay in execution of metro orders and risk of bidding in BMC orders). However, they maintain BUY with revised target price of Rs 300.