We maintain our ?buy? rating on Jain Irrigation as Q1 results were good, except for the adverse impact of rupee depreciation. The company has started to deliver on both revenue growth (+14% y-o-y in Q1) and balance sheet consolidation (receivables down 10% q-o-q to R1,740 crore).
We expect 17% Ebitda CAGR over the next two years, driven by 20% CAGR in micro irrigation revenues. Weak rupee, however, remains a key risk as it results in both margin erosion and MTM loss on forex debt.
We are cutting our FY14 and FY15 earnings by 14% each and valuation by 14.5% to R70/share on expectation of weaker margins due to sharp rupee depreciation (13% YTD). We expect consolidated gross margin to fall 200 bps y-o-y in FY14.
Revenue grew 14% y-o-y, (2% above our estimate), driven by 21% y-o-y growth in micro irrigation (after 25% de-growth in FY13). Exports grew 46% y-o-y. Eboda margin fell 340 bps y-o-y to 17.6% as a weak rupee led to higher raw material (polymer) cost which could not be passed on to customers entirely.
Ebitda, at R170 crore (-4% y-o-y), was in line with our estimate. Finance costs were lower at R98.4 crore. The weaker rupee also resulted in MTM loss of R110 crore on forex debt, resulting in post-tax loss of R46.5 crore (vs loss of R16.9 crore last year).
Deutsche