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Jyoti Structures 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Jyoti Structures (Jyoti)’s top-line performance was in-line with our expectations, posting a subdued 5.5% yoy growth to Rs.620cr due to slow execution and revenue deferrals. However, the Management is confident of strong execution in 4QFY2013 as the company has received clearances for its upcoming projects. The EBITDA margin came in flat yoy at 10.1%. Jyoti’s interest coverage multiple remains under stress, declining from 2.0x in 4QFY2012 to 1.6x presently. The increase in receivables has led to higher working capital borrowing, elevating the interest cost. Consequently, the PAT declined by 3.0% yoy to Rs.13cr.

Weak order inflow: The company reported weak order inflow of Rs.433cr in 3QFY2013. However, the Management believes order inflow will improve going forward as the company expects few orders from PGCIL and overseas markets to be finalized soon. Jyoti’s order backlog stood at Rs.4,605cr, up 7.1% yoy implying an order coverage of 1.8x trailing four quarter revenues. The order backlog was spread across transmission (57%), substation (14%) and rural electrification (29%) segments. Client-wise, the backlog mainly comprised of orders by PGCIL (26%), West Bengal (14%), Maharashtra (27%), Madhya Pradesh (4%), overseas (20%) and the private sector (3%). The company received major orders from Nigeria and Kenya, which boosted its overseas segment’s contribution to the top-line.

Outlook and valuation: Jyoti’s robust order book and recent focus to scale up its overseas operation to insulate itself from domestic headwinds will benefit the company in the medium to long term. The stock is currently trading at 3.7x our FY2014E EPS. Given the attractive valuation, we maintain our Buy rating on the stock, assigning a multiple of 4.5x FY2014E EPS, to arrive at a target price of Rs.49.