1QFY2012 Result Update | Capital Goods

July 28, 2011

Jyoti Structures
Performance Highlights
(` cr) Revenue EBITDA EBITDA margin (%) Reported PAT 1QFY12 1QFY11 % chg (yoy) 4QFY11 % chg (qoq)

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Capital Goods 713 0.8 165/74 307,889 2.0 18,210 5,488 JYTS.BO JYS.IN

`87 `100
12 Months

638 70 11.0 26

564 64 11.3 26

13.0 9.7 (30)bp (0.7)

722 84 11.6 35

(11.7) (16.6) (65)bp (25.3)

Source: Company, Angel Research

For 1QFY2012, Jyoti Structures (JSL) reported lower-than-expected results. The companys top line posted 13% yoy growth to `638cr, lower by 8.9% from our expectation of `700cr. EBITDA margin came in at 11%, which was broadly in-line with our estimates. Order backlog at the end of the quarter stood at `4,470cr. We maintain our Buy view on the stock. Lower revenue and higher expenses translate into flat earnings: Led by lower execution, JSL reported modest 13% yoy growth in revenue to `638cr (`564cr). EBITDA margin contracted by 30bp yoy to 11% mainly on account of higher raw-material costs and other expenses. In tandem with lower revenue and margin, EBITDA grew by mere 9.7% yoy `70cr (`64cr). Lower tax incidence during the quarter was dwarfed by higher interest (+35.5% yoy) and depreciation (+21% yoy) costs. Profitability for the quarter remained nearly flat, with PAT inching down marginally by 0.7% yoy to `26cr. Outlook and valuation: The earnings miss of 1QFY2012 does not warrant for the companys poor performance. On a conservative stance, we expect a growth target of 15% (vs. managements target of 20%) for FY2012E. While the current state of the T&D space is in doldrums with slackening order inflows, the ordering activity, especially from PGCIL, is expected to gather pace post 1HFY2012, which will adequately refill the order book and provide growth visibility for the coming years. The pessimism viz. high interest expenses and elongated working capital cycle seems to have factored in the stocks performance and downside from the current levels seems limited. We believe the concerns are overly worried. However, we remain cautiously optimistic and continue to maintain our Buy view on the stock with a revised target price of `100 (`104).

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 27.6 38.7 16.4 17.3

Abs. (%) Sensex JSL

3m (5.6)

1yr 1.4

3yr 26.9 (26.8)

(0.2) (45.6)

Key financials (Consolidated)

Y/E March (` cr) Net sales % chg Net profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2010 2,130 15.8 83 (0.9) 10.7 10.3 8.6 1.5 18.6 26.1 0.5 4.5

FY2011 2,400 12.7 100 18.4 11.2 9.7 8.7 1.2 18.7 25.4 0.5 4.1

FY2012E 2,763 15.2 125 25.8 11.0 12.2 7.1 0.9 16.6 23.7 0.4 3.7

FY2013E 3,087 11.7 150 19.7 11.0 14.6 5.9 0.8 15.0 22.9 0.4 3.2

Hemang Thaker
+91 22 3935 7800 Ext: 6817 hemang.thaker@angelbroking.com

Please refer to important disclosures at the end of this report

Jyoti Structures | 1QFY2012 Result Update

Exhibit 1: Quarterly performance

(` cr) Net Sales Other operating income Total income Stock adjustments Raw Material (% of total income) Erection and sub contracting exp. (% of total income) Employee Cost (% of total income) Other Expenses (% of total income) Total Expenditure EBITDA (EBITDA %) Interest Depreciation Other Income PBT (% of total income) Total Tax (% of PBT) Reported PAT (PAT %) EPS (`)
Source: Company, Angel Research

1QFY12 638 0 638 (18) 388 58.1 120 18.8 20 3.1 58 9.0 568 70 11.0 27 6 1 39 6.1 13 33 26 4.1 3.2

1QFY11 564 0 564 (13) 337 57.4 112 19.8 17 3.1 47 8.4 500 64 11.3 20 5 1 40 7.1 14 34 26 4.7 3.2

% chg (yoy) 13.0 13.0 0.0 15.1 7.1 13.7 22.2 0.0 13.4 9.7 35.5 21.0 114.6 (2.7) (6.6) 0.0 (0.7) 0.0 (0.8)

4QFY11 722 0 722 6 386 54.3 137 18.9 20 2.7 90 12.4 638 84 11.6 33 5 7 53 7.3 18 34 35 4.8 4.3

% chg (qoq) (11.7) (11.7) 0.0 0.7 (12.4) 0.3 (35.8) (11.0) (16.6) (18.4) 3.4 (81.1) (26.1) (27.5) 0.0 (25.3) (25.3)

FY11 2,380 0 2,380 (3) 1,339 56.2 451 18.9 72 3.0 247 10.4 2,106 274 11.5 948 202 83 167 7.0 565 34 111 4.7 13.5

FY10 2,013.1 3.1 2,016.2 10 1,224 61.2 304 15.1 60 3.0 181 9.0 1,779 237 11.8 786 169 24 144 7.2 524 36 91.9 4.6 11.2

% chg (yoy) 18.2 18.0 0.0 9.4 48.4 19.8 36.3 0.0 18.4 15.4 20.6 19.4 0.0 15.9 7.6 0 20.7

Exhibit 2: Actual vs. estimates

(` cr) Revenue EBITDA PAT EPS (`)
Source: Company, Angel Research

Actual 638 70 26 3.2

Estimates 700 78 32 3.9

Var (%) (8.9) (10.5) (18.4) (18.4)

High interest costs curb profit growth: Interest cost for the quarter rose by 35.5% yoy to `27cr (`20cr) mainly due to high rates on working capital loans. The recent rate increases in LC discounting (by 150bp to 10%) as well in other working capital loans added to the surge in interest cost during the quarter. Burdened with high interest, PAT remained nearly flat on a yoy basis.

July 28, 2011

Jyoti Structures | 1QFY2012 Result Update

Order inflow maintained: Order inflows during quarter totaled `621cr, up 14% yoy. Key orders included `524cr worth of orders for substation and transmission projects in India and Bhutan. Order backlog stood at `4,470cr at the end of 1QFY012. The order book was spread across the transmission (62%), substation (19%) and rural electrification (19%) segments. The backlog was constituted by PGCIL (23%), MSEDCL (25%), private players (13%) and other state utilities (38%). Management remained optimistic about the strong order intake going ahead, with `2,770cr worth of tenders submitted and a foreseeable order pipeline of `12,000cr from various projects. The South African subsidiarys order book remained at Rand340mn.

Exhibit 3: Order book trend

4,150 4,250 4,100 4,500 3,959 4,030 3,869 4,106 4,470 1,100 1QFY12 621

4,500 3,600

(` cr)

2,700

843

681

665

543

700

1,800 900 -

1QFY10

2QFY10

408

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

418

Order backlog

Order inflow

Source: Company, Angel Research

Key highlights of the conference call

Reaffirmed growth target of 20% and margin to sustain at current levels. Capex for FY2012 is estimated at `30cr35cr. 90% of the orders in the backlog are variable price contracts. Management is optimistic about the US subsidiary and expects it to be operational from 4QFY2012, with increased contribution from FY2013.

July 28, 2011

4QFY11

Jyoti Structures | 1QFY2012 Result Update

Investment arguments
Encouraging business outlook: Management indicated a strong order pipeline totaling `14,000cr (including the tendered bids for 2,770cr). While the current slowness in the T&D space portrays delays in the awarding of these projects, we expect JSL to receive good proportion of the orders on the back of its strong experience and presence in the transmission EPC space. Even after considering the base case scenario on the quantum of order wins, the order backlog should augment enough to provide sustainable growth. Overseas business will materialise gradually: JSL has been actively tapping the overseas markets by entering into JVs in South Africa and the Gulf. The formation of overseas JVs along with setting up a local manufacturing base would enable JSL to hasten its penetration into newer geographies and build a strong client base. The company has forayed into Americas and is in the process of setting up a transmission tower plant at a cost of ~US$30mn. The plant would have a capacity to manufacture ~36,000tpa of transmission towers. The facility will be operational in November 2011. Outlook and valuation: The earnings miss of 1QFY2012 does not warrant for the companys poor performance. On a conservative stance, we expect a growth target of 15% (vs. managements target of 20%) for FY2012E. While the current state of the T&D space is in doldrums with slackening order inflows, the ordering activity, especially from PGCIL, is expected to gather pace post 1HFY2012, which will adequately refill the order book and provide growth visibility for the coming years. The pessimism viz. high interest expenses and elongated working capital cycle seems to have factored in the stocks performance and downside from the current levels seems limited. We believe the concerns are overly worried. However, we remain cautiously optimistic and continue to maintain our Buy view on the stock with a revised target price of `100 (`104). Revision in estimates: We have revised our growth estimates for FY2012E and FY2013E and factored in higher interest costs. We have also estimated higher working requirements on the back of increased debtor levels. We project an improved outlook for FY2013E; however, we revise our estimates downwards on a conservative stance.

Exhibit 4: Revised estimates

FY2012E Earlier estimates Revenue EBITDA PAT
Source: Company, Angel Research

FY2013E Var. (%) (2.4) (2.4) (3.1) Earlier estimates 3,259 359 157 Revised estimates 3,087 340 150 Var. (%) (5.3) (5.3) (4.1) 2,763 304 125

Revised estimates

2,830 311 130

July 28, 2011

Jyoti Structures | 1QFY2012 Result Update

Exhibit 5: Key assumptions

Particulars Order inflow (` cr)
Source: Company, Angel Research

FY2012E 2,700

FY2013E 4,000

Exhibit 6: Angel EPS forecast vs. consensus

Y/E March FY2012E FY2013E
Source: Company, Angel Research

Angel forecast 12.2 14.6

Bloomberg consensus 14.5 15.1

Var. (%) (15.7) (3.1)

Exhibit 7: One-year forward P/E band

350 280 210 140 70 0

Jul-05

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Nov-05

Share Price (`)

Source: Company, Angel Research

Nov-06

Nov-07

5x

Nov-08

9x

Nov-09

13x

Exhibit 8: Peer comparison

Company ABB* Areva T&D* BHEL BGR Energy Crompton Greaves JSL KEC International Thermax Reco. Sell Neutral Neutral Buy Accum. Buy Buy Neutral CMP Tgt. price (`) 863 249 1,847 408 172 86 80 578 637 500 183 100 115 Upside/ (26.1) 22.6 6.1 15.7 44.5 P/BV(x) 6.6 5.1 3.7 2.5 3.0 0.9 1.8 4.2 5.7 4.3 3.0 2.1 2.4 0.8 1.4 3.4 P/E(x) 42.5 27.9 13.5 9.2 17.5 7.1 8.3 16.5 36.6 21.0 11.7 8.5 11.3 5.9 6.2 14.1 FY2011-13E 180.2 23.3 19.5 3.7 2.8 22.7 24.1 13.1 RoCE (%) 23.9 24.0 40.0 19.5 19.6 23.7 24.9 33.6 24.7 26.9 37.3 18.7 26.7 22.9 28.7 32.7 RoE (%) 16.6 19.7 29.4 30.0 18.1 16.6 23.9 28.3 16.8 22.1 27.3 26.8 23.7 15.0 26.3 26.7 (`) (Downside) (%) FY12E FY13E FY12E FY13E EPS CAGR FY12E FY13E FY12E FY13E

Source: Company, Angel Research;*Note: December year ending

July 28, 2011

Nov-10

17x

Mar-11

Jul-11

Jyoti Structures | 1QFY2012 Result Update

Profit & Loss statement (consolidated)

Y/E March (` cr) Operating income % chg Total Expenditure Raw Materials Mfg costs Personnel Costs Other Costs EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of associate Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E 1,374 41.3 1,198 893 171 36 99 176 39.2 12.8 7 169 40.1 12.3 47 2 1.2 123 39.8 0 123 49 39.6 75 0 0 0 75 75 34.3 5.4 9.2 9.2 33.5 1,839 33.9 1,632 1,204 220 46 162 208 18.0 11.3 10 198 17.2 10.7 69 6 4.2 134 9.0 0 134 49 36.7 85 0 0 0 85 85 14.2 4.6 10.4 10.4 13.5 2,130 15.8 1,901 1,250 378 72 201 229 10.2 10.7 18 211 6.7 9.9 80 6 4.6 138 2.3 1 137 53 38.7 83 0 0 0 83 84 (0.9) 4.0 10.3 10.3 (1.3) 2,400 12.7 2,132 1,345 459 77 250 268 17.2 11.2 21 247 17.1 10.3 96 5 3.1 156 13.5 0 156 56 36.1 100 0 0 (0) 100 100 18.4 4.2 12.1 9.7 (5.4) 2,763 15.2 2,459 1,598 511 87 263 304 13.5 11.0 22 282 14.1 10.2 103 7 3.8 186 19.0 0 186 60 32.5 125 0 0 0 125 125 25.8 4.5 12.2 12.2 25.8 3,087 11.7 2,748 1,756 595 104 293 340 11.7 11.0 27 313 11.0 10.1 98 8 3.6 223 19.7 0 223 72 32.5 150 0 0 0 150 150 19.7 4.9 14.6 14.6 19.7

July 28, 2011

Jyoti Structures | 1QFY2012 Result Update

Balance Sheet (consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves & Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Deferred Tax Asset Current Assets Cash Loans & Advances Inventories Debtors Others Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 114 46 68 2 0 10 0 821 14 109 79 500 118 333 488 2 570 190 55 135 4 0 17 0 1,133 39 228 153 712 0 550 583 1 740 244 69 175 2 0 17 0 1,350 54 185 247 863 0 665 684 0 878 283 87 196 8 0 17 0 1,572 67 180 231 1,093 0 722 850 0 1,071 318 109 209 4 0 17 0 1,905 104 212 287 1,302 0 827 1,078 0 1,307 358 136 222 4 0 17 0 2,105 114 240 313 1,438 0 927 1,178 0 1,421 16 0 322 338 0 225 7 570 16 0 402 419 0 313 9 740 16 0 475 491 0 369 18 878 16 0 560 576 0 477 18 1,071 21 0 915 936 0 354 18 1,307 21 0 1,054 1,074 0 329 18 1,421 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

July 28, 2011

Jyoti Structures | 1QFY2012 Result Update

Balance Sheet (consolidated)

Y/E March (` cr) PAT Adjustments Opr Profits Before W/Cap Changes Changes in Working Capital Taxes Paid during the year Cash Flow from Operations (Inc.)/Dec in Fixed Assets (Inc.)/Dec in Investments (Inc.)/Dec in Loans/advances Other Income Cash Flow from Investing Issue of Equity Inc/(Dec) in Loans Dividend Paid (incl.Tax) Others Cash Flow from Financing Cash generated/(utilised) Cash at start of the year Cash at end of the year FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E 75 108 182 (120) (49) 9 (17) 2 0 (2) (16) 0 64 (6) (46) 12 5 9 14 85 132 217 (118) (48) 51 (79) (7) 0 47 (38) 0 88 (7) (68) 12 25 14 39 83 147 230 (62) (49) 119 (53) (0) 0 (20) (73) 0 56 (9) (79) (31) 15 39 54 100 171 271 (170) (45) 56 (48) 0 0 3 (45) 0 107 (10) (95) 2 13 54 67 125 135 260 (180) (71) 10 (30) 0 0 0 (30) 4.1 (123) (14) 190 57 36 67 104 150 140 290 (93) (69) 128 (40) 0 0 0 (40) 0 (25) (12) (41) (78) 10 104 114

July 28, 2011

Jyoti Structures | 1QFY2012 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (Rs) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis(%) EBIT margin Tax retention ratio (%) Asset turnover (x) RoIC (Pre-tax) RoIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) RoCE (Pre-tax) Angel RoIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover (Gross Block) (X) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to Equity Net debt to EBITDA Interest Coverage 0.6 1.2 3.6 0.7 1.3 2.9 0.6 1.4 2.6 0.7 1.5 2.6 0.3 0.8 2.7 0.2 0.6 3.2 13.0 21 115 85 110 12.1 23 120 91 101 9.8 34 135 111 101 9.1 36 149 113 107 9.2 34 158 106 116 9.1 35 162 106 121 33.6 34.5 24.7 30.2 31.7 22.6 26.1 27.8 18.6 25.4 27.2 18.7 23.7 25.7 16.6 22.9 25.0 15.0 12.3 60.4 2.8 34.5 20.8 14.6 0.6 24.5 10.7 63.3 2.9 31.5 19.9 16.2 0.6 22.4 9.9 61.3 2.8 27.7 17.0 14.3 0.6 18.7 10.3 63.9 2.6 27.0 17.3 14.4 0.7 19.2 10.2 67.5 2.5 25.5 17.2 16.7 0.4 17.5 10.1 67.5 2.5 24.9 16.8 19.4 0.2 16.2 9.2 9.2 10.1 0.8 41.6 10.4 10.4 11.6 0.9 51.3 10.3 10.3 12.5 1.0 59.8 12.1 9.7 14.7 1.5 70.1 12.2 12.2 14.4 1.0 91.1 14.6 14.6 17.3 1.0 104.6 9.4 8.6 2.1 0.9 0.7 5.2 1.6 8.3 7.4 1.7 1.0 0.5 4.7 1.3 8.4 6.9 1.4 1.2 0.5 4.5 1.2 8.9 5.9 1.2 1.7 0.5 4.2 1.0 7.1 6.0 0.9 1.2 0.4 3.7 0.9 5.9 5.0 0.8 1.2 0.4 3.2 0.8 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

July 28, 2011

Jyoti Structures | 1QFY2012 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Jyoti Structures No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

July 28, 2011

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