J Kumar Infraprojects’ (JKIL) Q2FY18 revenue, at Rs 3.2 billion, rose 2% y-o-y; execution was impacted by raw material shortage post closure of quarries and heavy monsoon.
J Kumar Infraprojects’ (JKIL) Q2FY18 revenue, at Rs 3.2 billion, rose 2% y-o-y; execution was impacted by raw material shortage post closure of quarries and heavy monsoon. While EBITDA margin expanded 120 bps y-o-y, higher depreciation charges (up 28 % y-o-y) led to PAT at Rs 230 million, flat y-o-y. With tunneling expected to start in Mumbai Metro Line 3 project next month, we expect revenue to gain traction. JKIL’s robust revenue visibility (book-to-bill at 6.2x), healthy balance sheet (nil net debt) and ample opportunities in the metro space render it an attractive bet in the EPC space. Maintain ‘buy’ with a target price of Rs 294. Q2FY18 top line rose 2% y-o-y as work was impacted by heavy rains and shortage of aggregates due to closure of quarries in the Thane-Turbhe area. EBITDA margin was higher due to higher share of excavation work during the quarter. The 3 Metro projects in Mumbai contributed Rs 1.3 billion to revenue during the quarter. JKIL ended Q2FY18 with an order book of Rs 87 billion.
We expect execution to trend higher driven by: (a) start of tunneling work on Line 3 project next month; and (b) pick up in work on JNPT projects post resolution of land acquisition/utility shifting issues. Management expects to maintain order book at Rs 90-100 billion and will target upcoming metro line in Mumbai, Delhi, Ahmedabad and Surat for order inflows. JKIL has received mobilisation advance worth Rs 6.7 billion; as a result, its net debt is nil currently. Management expects debt to remain under control even post capex for the tunnel boring machines for Mumbai Metro Line 3 (since further Rs 1.3 billion mobilisation advance is yet to be received). We believe, JKIL’s low leverage will continue to provide it with an edge while bidding for large-value contracts since many peers continue to face balance sheet issues. Healthy balance sheet, robust order book and niche presence in the urban infra space are key positives for JKIL. With all major projects entering execution stage, we expect strong revenue growth going ahead.