Analyst corner: Order accretion stays healthy for J Kumar Infra

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Published: June 5, 2019 2:04:42 AM

Top line surged 25% y-o-y to `9.7bn aided by serene progress in metro projects (Mumbai, Ahmedabad and Pune), which cumulatively contributed `5.2bn to the top line.

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J Kumar Infraprojects (JKIL) posted yet another strong set of numbers with Q4FY19 revenue catapulting 25% y-o-y to `9.7bn. Order accretion continued to be healthy with the company bagging projects worth `50bn in FY19, resulting in a year-end order book of `104bn (book-to-bill of 3.7x). Revenue traction in ongoing projects, healthy revenue visibility and lean balance sheet (net debt to equity of 0.1x) are key positives for the stock.

Top line surged 25% y-o-y to `9.7bn aided by serene progress in metro projects (Mumbai, Ahmedabad and Pune), which cumulatively contributed `5.2bn to the top line. Ebitda margin, however, fell 130bps y-o-y to 13.8% as execution on multiple projects commenced during the quarter (margins are lower in initial stages). FY19 margin came at 15.7% and management has guided for a 15-16% range going ahead.

With execution in full swing, management has raised FY20 revenue guidance from `30bn to `31-32bn and has guided for `35-36bn top line in FY21.

As part of its investigation under the ‘shell company case’, Sebi, in September 2018, had passed an interim order stipulating exchanges to appoint an independent auditor to conduct a forensic audit on JKIL. The company was allowed 30 days to file an appeal. Management mentioned that all the final submissions have been made by the company and it is currently awaiting Sebi’s response.

Management is confident that a favourable outcome will be reached shortly. Execution of all projects in the order book has commenced and there are no slow/non-moving orders, except a ~`5.5bn project from NBCC, which has not yet commenced due to land acquisition issues. Management is currently evaluating the status of this project. The execution period of the current order book is 3.0-3.5 years.

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