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JMC Projects Q3FY13 results update

Contributed by Nirmal Bang

JMC Projects reported a muted performance in terms of topline growth, owing to slower execution of its order book. On the operating front, EBITDA margins disappointed owing to higher construction expenses. With 9mFY13 EBITDA margins at 4.8%, we expect JMC to end FY13 with EBITDA margin of 5% with marginal improvement expected in margins in Q4FY13. The company is favorably placed in 3-4 orders which should come in the coming year.

Revenues increased by 6.6% on a yoy basis to Rs. 611 cr for Q3FY13. Revenue was flattish on a qoq basis. This was due to slower execution of the order book.

EBITDA for the quarter was Rs. 28.8 cr, down by 25% on a yoy basis, but improving from Q2FY13. EBITDA margin at 4.7% saw a further dip of 203 bps yoy owing to 24.6% rise in construction expenses and the company’s inability to pass the entire cost increase in its projects. Margins improved 24 bps sequentially.

PAT for the quarter was Rs. 3.3 cr, down 72% yoy. PAT margin for the quarter was 0.5% as compared to 2.1% in Q3FY12 and 0.4% in Q2FY13. Increase in interest and depreciation costs, both on a yoy and qoq basis, combined with low EBITDA impacted the bottomline as well as the margin.

Order book at the end of Q3FY13 has been maintained at Rs 5,200 cr. Order inflow for the quarter was Rs. 660 cr, down 37.5% yoy and up 164% qoq. JMC’s order book has remained flattish in the last 3-4 quarters. Its order inflow also witnessed a significant drop yoy, but improved sequentially. Orderbook at FY13 end is seen close to Rs 5,500-6,000 cr.

Management has guided for 5% EBITDA margins in FY13 and marginally higher margin in FY14.

Road BOOT projects
- Rohtak – Bawal – Over 70% physical completed, Expected COD by Q1FY14
- Agra-Aligarh – Construction is underway, Expected COD by Q3FY14
- Nagpur-Wainganga – Over 20% physical completed, Expected COD by Q2FY15
- Rewa – MP – Financial closure signed, Resource mobilization in full swing

Valuation & Recommendation

JMC’s current order book provides revenue visibility for 2 years, however due to increasing construction expenses, the margins continue to remain under pressure with no significant improvement seen in the next 2-3 quarters. With the company changing its orderbook composition towards variable priced orders where cost escalation can be passed onto developers, and internal cost control measures, we expect to see some improvement in margins over the next 2-3 quarters. Any improvement in economic scenario and revival in capex will change the scenario for the company.

At CMP the stock trades at TTM PE of 8.4x and 10.6x its FY13E EPS. We maintain our HOLD rating on the stock with our earlier target price of Rs. 120.