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Hinging on asset monetization
We maintain BUY, with a reduced TP of Rs 173/sh (vs Rs 187/sh earlier). We have cut our target EPC multiple from 18x to 16x to factor in the debt build-up, delay in BOT monetization & increased Roads BOT shortfall funding.
HIGHLIGHTS OF THE QUARTER
* 4QFY19 Revenue was largely in-line at Rs 9.3bn (+29.7% YoY). With strong execution over the past 12 months, JMC has posted a robust 18% top line growth in FY19 (Rs 32.5bn). MP project is progressing well.
* Despite in line EBIDTA margins, 4QFY19 APAT at Rs 487mn was a strong 49% beat vs. our estimate, due to one-offs in depreciation and interest costs (~Rs 60mn).
* With Rs 10.6bn of new order inflows during 4QFY19 (Rs 56.3bn in FY19; 56% from Infra), the order book now stands at Rs 99.6bn (ex L1 of Rs 7bn, 3.1x FY19 revenue). JMC has guided for ~Rs 65bn inflows in FY20E (majorly during 2HFY20E; including Rs 16-20bn new orders from international markets).
* BOT assets reported a 7.4% traffic growth in FY19 with revenues growing ~12.9% YoY (excluding overloading). Avg collections improved to Rs 5.8mn/day in 4QFY19 (+13.5% YoY).
* JMC invested Rs 80mn as loss funding during 4QFY19 in BOT assets (Rs 384/410/750mn in FY18/FY19/FY20E). Total equity exposure now stands at Rs 7.4bn. Asset monetization is expected by FY20E. In case of delay, JMC may have to invest further Rs 700mn in FY21E.
* Net Debt has increased by ~Rs 1bn to Rs 6.9bn. With JMC continuing to invest in BOT assets in the near term (in addition to higher NWC requirements in its growing infra portfolio) we expect it to further inch up.
Over the past 3 years JMC has consciously increased its Infra portfolio (now ~36%) even as it observed restraint and resorted to selective bidding in its buildings portfolio. We expect JMC to clock 15.9% revenue CAGR over FY19- 21E even as APAT will grow only 4.6% (affected by higher depreciation and interest cost). The stock currently trades at 10.5/9.7x FY20/21E Core EPC earnings (after having recovered 70% from its 52W low). We will closely monitor the progress on BOT assets monetization.This remains essential for deleveraging. We maintain BUY.
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