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Jyoti Structures: Performance Highlights
Jyoti Structures: Performance Highlights
Jyoti Structures
Performance Highlights
(` cr) Revenue EBITDA EBITDA margin (%) Reported PAT 2QFY12 632.1 68.0 10.8 22.1 2QFY11 542.3 63.1 11.6 24.8 % chg (yoy) 16.5 7.8 (88)bp (10.9) 1QFY12 637.7 70.1 11.0 26.1 % chg (qoq) (0.9) (3.0) (24)bp (15.4)
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 495 0.8 147/58 220,647 2.0 17,289 5,202 JYTS.BO JYS.IN
`60 `78
12 Months
Jyoti Structures (JSL) reported a subdued performance for 2QFY2012 mainly on account of higher interest cost. The companys revenue and EBITDAM were broadly in-line with our estimates. However, higher-than-anticipated increase in interest cost led to disappointment on the earnings front. Increased interest costs have adversely impacted JSLs profitability since the past few quarters mainly on account of stretched working capital requirements and increasing interest rates. However, given the undemanding valuations, a 13% CAGR over FY2011-13E and healthy return ratios, we maintain our Buy view on the stock. Revenue and EBITDA growth in-line; interest costs hurt the bottom line: Steady project execution resulted in revenue growth of 16.5% yoy to `632.1cr (`542.3cr) for 2QFY2012, which was in-line with our expectation of `618.3cr. EBITDA margin witnessed a contraction of ~88bp yoy to 10.8%, in-line with our expectation. Interest costs soared by 49.9%/15.0% yoy/qoq, higher than our expectation, resulting in the bottom line declining by 10.9% yoy to `22.1cr (`24.8cr), against our estimate of `25.2cr. Outlook and valuation: The overall slowdown in the power sector has left transmission EPC companies to reel under pressure as order inflows have slackened. In-line with this, the JSL stock has fallen by ~28% and underperformed the BSE Sensex by ~18% over the last three months. At the CMP of `60, the undemanding valuations (3.9x and 0.6x on PE and PB basis; well below its historic PE multiple average of 13.0x), a 13% CAGR earnings story and reasonable return ratios (~20%) make JSLs stock attractive at current levels. Hence, we continue to maintain our Buy rating on the stock, albeit with a revised target price of `78 by assigning a reasonable multiple of 5.0x to its FY2013E EPS of `15.5.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 27.6 39.3 15.1 18.0
3m
1yr
FY2010 2,130 15.8 83 (0.9) 10.7 10.3 5.9 1.0 18.6 26.1 0.4 3.5
FY2011 2,400 12.7 100 18.4 11.2 12.1 5.0 0.9 18.7 25.4 0.4 3.4
FY2012E 2,818 17.4 115 14.9 11.0 14.0 4.3 0.7 18.3 23.0 0.4 3.9
FY2013E 3,135 11.3 127 11.1 11.0 15.5 3.9 0.6 17.2 22.4 0.3 2.7
Shailesh Kanani
+91 22 3935 7800 Ext: 6829 shailesh.kanani@angelbroking.com
Hemang Thaker
+91 22 3935 7800 Ext: 6817 hemang.thaker@angelbroking.com
2QFY12 632.1 0.0 632.1 5.1 352.8 56.6 124.8 19.7 20.5 3.2 60.9 9.6 564.1 68.0 10.8 31.0 5.6 2.0 33.4 5.3 11.3 33.7 22.1 3.5 2.7
2QFY11 542.3 0.0 542.3 3 320.8 59.7 94.7 17.5 16.0 3.0 44.5 8.2 479.2 63.1 11.6 20.7 5.3 0.2 37.4 6.9 12.5 33.6 24.8 4.6 3.0
% chg (yoy) 16.5 16.5 10.0 31.7 27.8 37.0 17.7 7.8 49.9 5.5 (10.7) (10.3) (10.9) (11.0)
1QFY12 637.7 0.0 637.7 (17.8) 388.4 58.1 119.7 18.8 19.7 3.1 57.6 9.0 567.5 70.1 11.0 27.0 5.5 1.3 39.0 6.1 12.9 33.0 26.1 4.1 3.2
% chg (qoq) 1HFY12 (0.9) 1,270 0.0 (12.7) (9.1) 4.2 3.8 5.8 741.2 57.4 244.5 19.3 40.2 3.2 118.5 9.3 1,131.6 (3.0) 15.0 1.2 (14.4) (12.4) (15.4) (15.4) 138.2 10.9 58.0 11.1 3.3 72.4 5.7 24.1 33.3 48.3 6.5 5.9
1HFY11 1,107 0.1 1,107 (10.0) 658.2 58.6 206.5 18.7 33.3 3.0 91.6 8.3 979.6 127.0 11.5 40.6 9.8 0.9 77.5 7.0 26 33.9 51.2 7.8 6.2
% chg (yoy) 14.7 14.7 12.6 18.4 20.5 29.4 15.5 8.7 42.8 12.7 (6.6) (8.3) (5.7) (5.7)
(0.9) 1,269.7
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
2QFY12
2QFY12
3,000
3,869
4,030
4,100
843
681
665
700
2,000 1,000 -
1,100
543
1QFY10
2QFY10
408
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
418
4QFY11
1QFY12
621
Order backlog
Source: Company, Angel Research
Order inflow
2QFY12
550
4,375
Investment arguments
Robust order book: JSL boasts of a strong order book (1.8x FY2011 revenue), which provides revenue visibility for the next couple of years. Further, performance on the order inflow front from the company has been satisfactory (bagged orders worth `1,200cr in 1HFY2012 in spite of numerous headwinds currently faced by the power sector). Also, management has indicated potential order wins of `1,100cr within the next two months, which will render revenue visibility for FY2013E. Recent commentary from PGCIL also suggested strong ordering in due course. Hence, we expect JSL to win sizable orders on the back of its vast experience and strong presence in the transmission EPC space. Stable operating margins: Management has been pretty selective on choosing orders. As a result, the companys EBITDA margin has been fairly stable (11.011.5%) since the past several quarters, despite pricing pressures. Hence, we do not expect margins to contract going ahead, as our channel checks suggest that the overall business opportunity in the T&D space is increasing and new entrants are finding it difficult to execute their current orders in a profitable manner. Diversifying business model to tackle the current slowdown: JSL has been actively tapping the overseas markets by entering into JVs in South Africa and the Gulf. The company also forayed into the US by setting up a transmission tower plant (estimated cost of ~US$30mn). The plant would have a capacity to manufacture ~36,000tpa of transmission towers (operational by November 2012) with a revenue potential of ~`324cr annually (@100% capacity utilization). In addition, the company recently entered into a JV with Lauren Engineers and Constructors India Pvt. Ltd. with an intent to enter into power plant EPC. The JV company (Lauren Jyoti Pvt. Ltd.) also bagged an order worth `551cr to set a 50MW solar thermal power plant from Godavari Green Energy on a turnkey basis. We believe the potential of these new ventures will materialize gradually and insulate the company from domestic headwinds to some extent.
Outlook and valuation: The overall slowdown in the power sector has left transmission EPC companies to reel under pressure as order inflows have slackened. In-line with this, the JSL stock has fallen by ~28% and underperformed the BSE Sensex by ~18% over the last three months. At the CMP of `60, the undemanding valuations (3.9x and 0.6x on PE and PB basis; well below its historic PE multiple average of 13.0x), a 13% CAGR earnings story and reasonable return ratios (~20%) make JSLs stock attractive at current levels. Hence, we continue to maintain our Buy rating on the stock, albeit with a revised target price of `78 by assigning a reasonable multiple of 5.0x to its FY2013E EPS of `15.5.
(`)
140 70 0
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
5x
9x
13x
17x
Revision in estimates: We have slightly tweaked our estimates for FY2012E and FY2013E to factor in faster execution, current order inflow scenario and higher working capital requirements on the back of increased debtor levels.
FY2013E Var. (%) 2.0 2.0 (8.3) Earlier estimates 3,087 340 150 Revised estimates 3,135 345 127 Var. (%) 1.6 1.4 (15.1) 2,818 310 115
Revised estimates
Oct-11
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
10
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 OB/Sales 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 1.0 2.2 2.3 0.6 1.3 2.3 13.0 21 115 85 110 12.1 23 120 91 101 9.8 34 135 111 101 9.1 36 149 113 107 9.4 34 176 114 126 9.3 34 176 114 127 33.6 34.5 24.7 30.2 31.7 22.6 26.1 27.8 18.6 25.4 27.2 18.7 23.0 24.1 18.3 22.4 24.0 17.2 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 2.4 23.9 16.2 13.9 0.9 18.2 10.2 67.5 2.4 24.0 16.2 13.9 0.8 17.9 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 12.1 14.7 1.5 70.1 14.0 14.0 16.8 1.0 82.9 15.5 15.5 18.7 1.0 97.2 6.6 6.0 1.4 1.3 0.5 4.0 1.2 2.3 5.8 5.2 1.2 1.5 0.4 3.7 1.0 2.0 5.9 4.8 1.0 1.7 0.4 3.5 0.9 1.9 5.0 4.1 0.9 2.5 0.4 3.4 0.8 1.9 4.3 3.6 0.7 1.7 0.4 3.8 0.8 1.8 3.9 3.2 0.6 1.7 0.3 2.7 0.7 1.8 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E
11
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):
12