J Kumar Infraprojects Ltd. share price target

J Kumar Infraprojects (JKIL) posted revenue of Rs.374 cr in Q1FY18 vs Rs.403 cr in Q1FY17 on account of shortage of raw material for Mumbai projects due to mining ban on the quarries in Turbhe.

JKILs 4QFY17 net revenues/EBIDTA/APAT, came in ~11/17.1/26.3% below our estimates respectively. Delay in shifting of utilities in JNPT/Metro projects impacted execution. The balance sheet remained stable, with net debt at Rs 3.5bn and net D/E at 0.25x vs Rs 4.7bn and 0.34x during 3QFY17.

JKILs 3QFY17 APAT of Rs 268mn was 9.1% ahead of our estimate, led by 21.1% YoY revenue growth (4% ahead of our estimates).The balance sheet remains stable, with net debt at Rs 4.7bn and net D/E stood at 0.34x vs Rs 4.8bn and 0.36x during 2QFY17. Debtors have increased by Rs 1.2bn on account of the Metro project (Rs 1,120mn) and the same have lessened in 4QFY17E.

After growing by 10.4% in Q1, JKIL's contract revenue contracted by 5.7% in Q2 - income from operations nosedived 6.4%, the weakest showing in six quarters largely due to heavy monsoons and nascent stage of some large metro orders. Its transportation business made up for much of the dilly dallying of its civil business - Rs 8.66 crs ($1.3m) in Q2 from Rs 69.58 crs ($10.2m) in Q1- as it posted 27.5% growth in revenues in H1 - revenue share 84.3% from 67.9%. Civil business reported revenues of Rs 78.24 crs ($11.5m) in H1, down 58.2% from the same period a year ago; Rs 8.66 crs...

J Kumar Infraprojects (JKIL) in its 2QFY17 posted revenue of Rs.310 cr (de-growth of 6.4% on YoY), lower than our estimates on account of slow down in the execution of JNPT order and change in project mix in favour of new projects. The EBITDA margin sustained at healthy level of 18.2%. The net profi..

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J Kumar Q2FY17 performance was below our expectations on account of muted execution during the monsoon season. Revenue declined 6% YoY to Rs 3.09bn (vs. our estimate of +8% YoY) while EBITDA margin remained flat YoY at 18.2%. Thus, EBITDA declined by 6% YoY to Rs 563mn. Net profit increased 5.3% YoY to Rs 230 mn led by higher other income. Management states that the execution has been impacted in Q2FY17 because of monsoon and some unexpected delays in Mumbai metro lines 2 & 7. We have revised downwards our earnings estimates for FY17E/18E by 16%/20%, factoring in delay in execution and reduction in OPM.

JKIL 2QFY17 RPAT of Rs 230mn was in-line with our estimates, on account of lower taxes (-25% YoY) and higher other income ( 89% YoY). Net revenues were 13% below estimates owing to heavy monsoons and slower than expected ramp-up in JNPT road project.

J Kumar Infra projects Ltd. (JKIL) is a Mumbai based infrastructure developer with a successful track record of completing marquee projects spread across the transportation, civil infra, irrigation and piling verticals. It has largely operated in the Northern-Western belt viz. Maharashtra, Delhi, Gujarat, Rajasthan and UP. As of June 2016 end, its order book stood at Rs 8,646 crore, 6.1x FY16 revenues. Of the total order book, the company has Rs 5,368 crore worth of Mumbai Metro orders bagged in July, 2016. We met with the management of JKIL, which recently was in news for its JV being barred by the BMC on account of suspected irregularities in the repair work undertaken by the subcontractor of the JV on a particular stretch of road in the Bandra- Dahisar route. Investors...

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.