PINC Result Review – J. KUMAR INFRAPROJECTS LTD.

J. KUMAR INFRAPROJECTS LTDJKumar results are in line, with a PAT of Rs132mn against our expectation of Rs131mn. We are marginally disappointed on the topline front at Rs1700mn against ours Rs1850mn but positively surprised on the EBITDA margin at 15.9% against our 15.7%. We maintain our numbers and also observe that in the last 3months there has been a re-rating in the stock from P/E of 6x-7x one year forward to 8x, which is as per our expectation and we believe the re-rating to continue as the company achieves close to Rs10bn turnover and Rs18bn order book by end of FY11. Hence we enhance its P/E to 9x on one year forward EPS of Rs31 valuing at Rs279 and maintain our BUY recommendation.

Healthy Bidding profile… JKumar has bid for Rs60bn worth of Projects with various authorities in different States and have qualified for three BOT PWD projects in the state of Rajasthan worth Rs13.4bn.

Order book marginally up… Order book has improved marginally from Rs13.5bn to Rs14bn of which skywalk accounts for Rs2.25bn to be executed within next 12months.

Sales Mix 89% of the revenue are from the transportation segment against 96% in Q1FY11, of which skywalk share was lower this quarter at 13% against
26% in Q1FY11 and 40% in FY10. Flyover had the highest share at 58% whereas roads were 18%. Rest are piling and RMC sales.

VALUATIONS & RECOMMENDATIONS At CMP of 245, the stock is trading at a PE of 8.5x FY11E EPS of 29 and 7.5x FY12E EPS of 32.5. We expect the re-rating to continue as JKumar diversifies and build upon its order book over the next 6-12months. Given the good performance in H1FY11 and healthy bidding profile we increase our P/E to 9x and value the stock at Rs279 per share on one year forward earnings of Rs31. We re-iterate our 'BUY' recommendation on the stock.