Prabhudas Lilladher's research report on J.Kumar Infraprojects
JKIL reported mixed set of results. The impact of Covid-19 remains high compared to its peers as over 90% of its order book belongs to urban areas. JKIL’s revenues in 4QFY20 fell by 9.3% YoY due to loss of ~20-25 crucial days of execution in Mar’20 (as lockdown impact started early in Mumbai & Delhi). In May’20, JKIL resumed operations in most of its project sites; with labour availability being lowest at 20-25% pre-covid levels (vs peer average of 40-50%). Hence the projects are currently operating at ~15-20% efficiencies. The company is observing trend reversal in labour migrants from June’20 and expects normalcy to attain post monsoon. Further, they have reduced fixed cost per month to ~Rs270mn from Rs400mn (Pre-Covid) led by rationalization of equipment rentals and employee costs.
Outlook
The company has a strong track record of executing roads and bridges, structural buildings, urban infrastructure such as metro, railway, subways and skywalks. JKIL stands strong on the back of a) healthy order book (Rs116.4bn as on 4QFY20) with steadily increasing order ticket size, b) strong execution capabilities, c) controlled financial leverage (D:E of ~0.4), d) strong EBITDA margins (~15-16% over FY16-20). At CMP, the stock trades at a P/E of 19.9x/3.2x on FY21E/FY22E EPS and is trading at an EV of 2.7x/1.9x FY21E/FY22E EBITDA. We maintain BUY rating on the stock with a TP of Rs176. (earlier TP of Rs218).
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