INITIATING COVERAGE

10 SEP 2014

J. Kumar Infraprojects
BUY
INDUSTRY

CONSTRUCTION

CMP (as on 10 Sep 2014)

Rs 319

Target Price

Rs 422

Nifty

8,094

Sensex

27,057

KEY STOCK DATA

Bloomberg/Reuters

JKIL IN/JKIP.BO

No. of Shares (mn)

32

MCap (Rs bn) / ($ mn)

10/169

6m avg traded value (Rs mn)

32

STOCK PERFORMANCE (%)

52 Week high / low
Absolute (%)
Relative (%)

Rs 351/130
3M

6M

12M

4.3

76.6

106.4

(1.5)

53.2

71.1

SHAREHOLDING PATTERN* (%)

Promoters
FIs & Local MFs

59.16
4.59

FIIs

10.18

Public & Others

26.07

Source : BSE * As on Jun 14

Adhidev Chattopadhyay
adhidev.chattopadhyay@hdfcsec.com
+91-22-6171-7317

Quality urban infra play

We like J. Kumar Infraprojects (JKIL) given (1)
established execution expertise in the urban
infrastructure space, (2) strong EBITDA margin
profile of over 15%, (3) high revenue visibility with
Mar-14 order book of Rs 31.5bn (2.6x FY14 revenues),
(4) strong balance sheet with net debt/equity of 0.5x
post the recent QIP of Rs 1.4bn and (5) geographical
diversification of the order book.
With an expected thrust on development of urban
infrastructure over the next few years, JKIL is well
placed to garner fresh orders and also maintain
margins owing to its policy of minimal subcontracting and owning machinery to execute
projects. JKIL currently has a robust order book of
~Rs 31.5bn (excluding L1 orders of ~Rs 10bn) that is
2.6x FY14 revenues, with over 90% in transportation
segment.
Owing to strong order book and execution visibility
on large projects such as Delhi Metro and SionPanvel road project, we expect revenues to grow at
17% CAGR over FY14-17E to Rs 19.2bn. We estimate
PAT CAGR of 20% over FY14-17E and expect JKIL to
maintain healthy RoEs of ~15% in FY15-17E factoring
the dilution impact of recent fund raising. We initiate
coverage on JKIL with a BUY rating with TP of Rs
422/sh based on 10x P/E of average FY16-17 EPS
(Sep-16) of Rs 42.2, in line with multiples of mid cap
construction companies.

Strong urban transportation player

JKIL is a specialised player in urban transportation

having executed more than 75 projects and currently
having over 40 ongoing projects. JKIL is involved in the
construction of metro, roads, flyovers, skywalks,
buildings and tunnels.

Backward integration key to higher margins

JKIL has been able to maintain EBITDA margins of over

15% in FY10-14 owing to a large fleet of owned modern
construction equipment and 15 ready mix concrete
plants catering primarily to its captive requirements.

Key Risks

Key downside risks are lower than expected order

inflows, decline in EBITDA margins below 16% and
concentration of over 90% order book in the
transportation segment.

FINANCIAL SUMMARY (STANDALONE)

(Rs mn)

FY13

FY14

FY15E

FY16E

FY17E

10,011

11,871

14,246

17,095

19,231

1,678

2,062

2,474

2,916

3,254

APAT

762

844

961

1,266

1,455

EPS (Rs.)

27.2

30.2

29.8

39.3

45.1

P/E (x)

11.7

10.6

10.7

8.1

7.1

6.0

6.4

5.7

4.9

4.3

16.2

15.6

14.0

14.9

15.0

Net Sales
EBIDTA

EV/EBITDA
RoE (%)

Source : Company, HDFC sec Inst Research

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

JKIL : Strong urban transportation player

Currently, over 90% of JKILs

order book is concentrated
in the transportation
segment with the balance
coming from irrigation, civil
construction and piling
projects.
JKIL has diversified across
geographies and currently
more than 50% of the order
book is outside
Maharashtra

Strong urban infra EPC player : JKIL is a specialised

player in urban transportation having executed
more than 75 projects and currently having over 40
ongoing projects. JKIL is involved in the construction
of metro, roads, flyovers, skywalks, buildings and
tunnels. The companys promoters have been in the
contracting business since 1980 (starting as a
maintenance contractor for PWD buildings). JKIL
was originally incorporated as J. Kumar &Company
(India) in December 1999. It started its operations in
2004 subsequent to the transfer of the Class 1A
registration of J. Kumar & Company to JKIL.
Current order book of Rs 41.5bn : JKIL has an order
book of ~Rs 41.5bn as of Jun-14 (3.5x FY14 revenues
including L1 orders of Rs 10bn). Currently, over 90%
of JKILs order book is concentrated in the
transportation segment with the balance coming

Transportation accounts for majority of order book

Transport

Irrigation

Civil Construction

from irrigation, civil construction and piling projects.

Although the state of Maharashtra accounted for
nearly all of JKILs order book up to FY10, JKIL has
diversified across geographies and currently more
than 50% of the order book is outside Maharashtra.

Backward integration key to higher margins : JKIL

has been able to maintain EBITDA margins of over
15% in FY10-14 owing to a large fleet of owned
modern construction equipment and 15 ready mix
concrete plants catering primarily to its captive
requirements.

JVs to augment bidding and execution : JKIL has

entered into joint ventures with national and
international players such as China Railway No.3
Engineering Group Co. Ltd, NCC Limited (NR) and
PBA Infrastructure Limited to enable it to bid for
larger projects and scale up execution capabilities.

Transportation segment provides majority of revenues

Piling

100%

Transport

Irrigation

Civil Construction

Piling

100%

90%

90%

80%

80%

70%

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

10%

10%

0%

0%
FY10

FY11

FY12

Source: Company, HDFC sec Inst Research

FY13

FY14

FY10

FY11

FY12

FY13

FY14

Source: Company, HDFC sec Inst Research

Page | 2

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

JKIL: DETAILS OF BUSINESS VERTICALS
Transportation Engineering

JKIL has a diversified mix of

projects across segments and
geographies

The transportation segment is

JKILs key area of expertise
where it has capabilities to
construct a variety of
structures. JKIL has entered
into joint ventures with
national and international
players such as China Railway
No.3 Engineering
Group Co. Ltd, NCC Limited
(NR) and PBA Infrastructure
Limited

Civil Construction

Metro
Roads (rigid and flexible
pavement roads)
Flyovers
Skywalks
Pedestrian Subways
Bridges
ROB and RUB
Storm Water Drainage
Systems
Grade Separators
Airport Runways
Tunneling work

ESIC (Hospital Cum Medical

College)
Railway Terminus / Stations
Commercial Buildings
Sports Complexes
Swimming Pools

Irrigation Works

Others

Earthen dams
Minor Irrigation Tanks
Spillways
Canals
Acqueducts

Piling
RMC

Source: Company, HDFC sec Inst Research

JKILs order book spread across geographies

Maharashtra

Delhi

Rajasthan

Govt. projects account for majority of order book

Government

Gujarat

Private

100%

100%

90%

JKILs order book has a good

geographical spread across
West and North India

90%

60%

60%

Government projects account

for majority of JKILs order
book with the Delhi Metro and
Sion-Panvel being the key large
projects

50%

50%

40%

40%

30%

30%

20%

20%

10%

10%

80%

80%

70%

70%

0%

0%
FY10

FY11

FY12

Source: Company, HDFC sec Inst Research

FY13

FY14

FY10

FY11

FY12

FY13

FY14

Source: Company, HDFC sec Inst Research

Page | 3

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

JKIL : MAJOR PROJECTS EXECUTED (AS OF MARCH 2014)
Order Size Executed
(Rs mn)

Segment

Project

Client

Transportation

Design and Construction of Flyover on Dr Baba Saheb Ambedkar

Road, Mumbai, Maharashtra

MMRDA

Transportation

Augmentation of SWD system catchment No. 117 BPT Colony,

Railway yard and Training of Kharoo Creek Nalla

Dy. Chief Engineer

834

Transportation

Design & Construction of bridge cum flyover and approach roads

near existing Holkar Bridge on Mula River, Pune

PMC

660

Transportation

Draining of Mithi River (Widening and deepening, RCC retaining

wall, service road) from Custom colony FOB to Pipeline Road, Powai

Dy. Chief Engineer

603

Transportation

Cleaning and Improvement of SWD and nallas including reconstruction in

Rajendra Nagar Nalla

Dy. Chief Engineer

491

Transportation

Draining/Widening/Deepening of Usha Nagar Nalla System, (D/S of

Railway Line). Bhandup (E)

MCGM

417

Transportation

Construction of Pedestrian Skywalk Bridge (Phase II) Package-2

(Wadala Road, Sewree, Reay Road and Sandhurst Road)

MSRDC

400

Transportation

Construction of Flyover near Times of India Building at Malad Junction on

Western Express Highway

MSRDC

345

Transportation

Improvement of Kannawar Nagar Nalla system and training of Bombay

Oxygen Nalla

MCGM

266

Transportation

Construction of Skywalk at Parel, Chinchpokali and Cotton Green

MSRDC

261

Civil Construction

Construction of Swimming Pool Complex at H.R. Johnson Tile Co., L.B.S.

Road, Thane (W), Thane

TMC

94

Civil Construction

Construction of elevated Olympic size swimming pool, Diving pool,

recreation pool, Health Club bldg. and Game Hall and Roads
for Goregaon Sports Club

GSC

83

Irrigation

Construction of Aqueduct @ R.D. 655 mtr of Bembla Main Canal

Ex. Engineer, Bembla

Main Canal Division,
Yavatmal

82

1,830

Source: Company, HDFC sec Inst Research

Page | 4

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

Backward integration has enabled JKIL to achieve superior EBITDA margins

In order to ensure timely completion of projects, JKIL

owns a number of plants and equipments required for
construction. This includes tunnel boring machines
(TBM), hydraulic piling rigs HR 180 and HR 130,
putmiester mobile boom placer concrete pump and
stationery concrete pumps, RMC plants, transit mixers,
various capacity cranes, poclains, front end loaders,
JCBs, trucks and tippers and a large number of
shuttering and centering plates. Further, the company
engages in minimal sub-contracting of work.

As a result, JKIL has achieved margins of over 15% over

FY09-14 as compared to the industry average of 9-12%
from road projects.

JKIL has 15 RMC plants located across various parts of

the country. The availability of the ready mix transit

EBITDA margins of over 15% owing to in-house tools

JKIL follows a model of

owning the required
equipment and does minimal
sub-contracting of work
As a result, JKIL has achieved
margins of over 15% over
FY09-14 as compared to the
industry average of 9-12%

18.0

17.4
16.8

17.0

16.1

14.9

JKIL also has a work force that consists of 3,024 fulltime employees out of which 761 consist of
engineering staff. Hence, JKIL has a track record of
timely project completion and has also received
bonuses for early completion in few projects.

Going forward, we believe that JKILs backward

integration and owned equipment will enable the
company to grow its order book without substantially
sacrificing margins.

Transportation accounts for majority of order book

Transport

Irrigation

Civil Construction

Piling

100%
90%

16.0
15.0

mixers enables JKIL to service multiple locations for its

contracts from a single nodal point. JKIL also sells ready
mix concrete to third parties which helps in
augmenting the companys revenues and use the
RMCs to their optimum levels.

80%

16.8

70%
60%

15.1

50%

14.0

40%

13.0

20%

30%
10%

12.0
FY09

FY10

FY11

FY12

Source: Company, HDFC sec Inst Research

FY13

FY14

0%
FY10

FY11

FY12

FY13

FY14

Source: Company, HDFC sec Inst Research

Page | 5

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

Urban Infrastructure : Strong growth prospects in India

For the Twelfth Five Year

Plan, the working group
constituted by the Planning
Commission on financing
urbanisation has estimated
a required investment of Rs
2,884bn for the urban
transport sector
With the formation of a
new Government at the
Centre in May 2014, the
proposed thrust on
urbanisation through the
proposed development of
100 Smart Cities across
India is expected to provide
an additional fillip over the
long term

In 2011, ~31.3% of Indias population lived in urban

areas and the rate of urbanisation was expected to be
~2.47% between 2010 and 2015 (as per CIA World
Factbook).
According to the High Powered Expert Committee
(HPEC, set up by the Indian Ministry of Urban
Development) 2011 report,
there is a huge
requirement of investment in urban infrastructure with
Rs 40,000bn as capital expenditure and another Rs
20,000bn for operation and maintenance (O&M)
expenditure (as per 2009-10 prices) required to be
spent over the next 20 years.
Of this, Rs 17,300bn will be required for urban roads,
Rs 8,000bn for sectors delivering urban services such as
water supply, sewerage, solid waste management and

storm water drains. Further, Rs 4,000bn will be

required for renewal and redevelopment including
slums.
For the Twelfth Five Year Plan, the working group
constituted by the Planning Commission on financing
urbanisation has estimated a required investment of Rs
2,884bn for the urban transport sector. The group has
also estimated a required capex of Rs 992bn for water
supply/sanitation for the Twelfth Plan period.
With the formation of a new Government at the Centre
in May 2014, the proposed thrust on urbanisation
through the proposed development of 100 Smart Cities
across India is expected to provide an additional fillip
over the long term.

ESTIMATES OF CAPEX REQUIRED FOR URBAN TRANSPORT SECTOR IN XII PLAN

Annual Capex (Rs bn)

2012

2013

2014

2015

2016

Total

Urban roads

298

352

416

490

579

2,135

Mass transit

78

92

108

127

150

555

Traffic management systems

17

20

24

28

33

121

23

10

10

10

10

10

50

406

477

562

661

778

2,884

Street lighting
Capacity building (urban transport)
Total

Source: Government Documents, HDFC sec Inst Research

Page | 6

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

JKILs order book provides strong revenue visibility

JKIL has an order book of ~Rs

41.5bn as of Jun-14 (3.5x FY14
revenues including L1 orders
of Rs 10bn). Currently, over
90% of JKILs order book is
concentrated in the
transportation segment with
balance coming from
irrigation, civil construction
and piling projects

Current order book of Rs 41.5bn : JKIL has an order

book of ~Rs 41.5bn as of Jun-14 (3.5x FY14 revenues
including L1 orders of Rs 10bn). Currently, over 90% of
JKILs order book is concentrated in the transportation
segment with balance coming from irrigation, civil
construction and piling projects.
Order book to drive revenue growth : JKILs revenues
have grown at a 24% CAGR over FY09-14 driven largley
by order book tripling to Rs 36.6bn as of Mar-13 from
Rs 12.2bn as of FY09. As a result of the growing
revenue coupled with large order book, we expect
revenues to grow at 17% CAGR over FY14-17E to Rs
19.2bn. With a net debt/equity of just 0.5 as of Jul-14
and capex programme nearing completion, JKIL is well
positioned to bid for new projects over FY15-17E on a
sustainable basis.

Incremental orders to shore up order book in FY15-17E

40.0

Rs bn

30.0
25.0

OB/Bill (x)
Order Book/Bill

3.7

35.0

2.6

2.3

1.8

1.6

4.0
3.5
3.0

2.7

2.5

20.0

2.0

15.0

1.5

10.0

1.0

5.0

0.5

Further, with an expected thrust on urban

infrastructure development by the new Central
Government, more orders will start flowing in at the
State level across geographies that will enable the
company to maintain a diversified order book.

Management maintains that it will be judicious in

bidding for projects and will look to maintain EBITDA
margins of over 15% across its order book, even on a
higher revenue base.

As a result, we expect JKIL to maintain a healthy order

book/bill ratio over FY15-17E with transportation
projects having over ~80% share. Any large project
wins through the JV route may provide an additional
fillip to revenues.

Order book concentrated in transportation segment

Civil
Constructio
n
6%

Piling Work
0%

Irrigation
2%

Transportat
ion
92%

Source: Company, HDFC sec Inst Research

FY17E

FY16E

FY15E

FY14

FY13

Management maintains that it

will be judicious in bidding for
projects and will look to
maintain EBITDA margins of
over 15% across its order book

Order Book

FY12

With a net debt/equity of just

0.5 as of Jul-14 and capex
programme nearing
completion, JKIL is well
positioned to bid for new
projects over FY15-17E on a
sustainable basis

Source: Company, HDFC sec Inst Research

Page | 7

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

JKIL : MAJOR PROJECTS CURRENTLY UNDER EXECUTION (AS OF MARCH 2014)

Segment
Transportation
Transportation
Transportation

Project
Design and construction of tunnel by Shield TBM, Tunnels,
Stations and Ramp by Cut & Cover method between Lajpat
Nagar and Hazrat Nizamuddin stations for Delhi Metro Phase
III
Widening & Improvement of Sion Panvel
Special state Highway (under BOT ) from Uran Flyover
Design and Construction of Tunnel by Shield TBM, Tunnels by
Cut & Cover, Underground Station at Naraina Vihar & Ramps
at Mayapuri and Delhi Cantonment for Delhi Metro Phase III

Client

Order Size
(Rs mn)

Outstanding Order
Value as of Mar-14

DMRC

10,109

9,343

ESSEL WTR

6,000

3,377

DMRC

3,759

3,405

Transportation

Construction of ROB at Jogeshwari (South), Mumbai

MCGM

2,981

1,389

Transportation

Construction of Eastern Freeway section from Panjarapol to

Chembur Mankhurd Link Road

MMRDA

2,938

-*

Transportation

Concreting of various roads in Western Suburbs of Mumbai

MCGM

2,049

2,049

MSRDC

1,888

439

CIDCO

1,460

105

DMRC

1,529

530

CIDCO

1,320

1,260

623

341

5,768

2,909

926

898

77

Transportation
Transportation
Transportation
Transportation
Civil
Construction
Civil
Construction
Irrigation
Irrigation

Construction of Flyover at Kapurbawadi Junction on Thane

Ghodbunder Road
Design and Construction of 4.91 km. elevated via duct for Navi
Mumbai Metro Project
Design and Construction of viaduct and two Elevated stations
namely Rohini Sector -18 & Badi Corridor for Delhi Metro
Phase III
Design & Construction of Depot-cum-Workshop at Taloja for
Navi Mumbai Metro Line
Modernization of Integrated Border Check Post at 22
locations in the states of Maharashtra Check
Construction of Building in Rajasthan from Uttar Pradesh
Rajkiya Nirman Nigam Ltd.
Lower Wardha Mail Canal- Construction of Barrage @ Pulgaon
on Wardha River with mechanical gate erection, survey design
and all work
Dahegaon (Gargoti) M.I Tank Tq Ralegaon Dist Yavatmal
Construction of earthwork of Dam, Excavation of Approach
and tail channel, Construction of Waste wier

Sadbhav Engineering
UPRNNL
Ex.Engineer,Bembla
Main Canal Division,
Yavatmal
Ex.Engineer, Bembla
Main Canal Division,
Yavatmal

Source: Company, HDFC sec Inst Research, * Final bill is pending

Page | 8

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

Financial Analysis

The key risk to our assumptions is lower than

estimated EBITDA margins from incremental order
wins.

EBITDA margins to remain stable over FY15-17E

10.0
5.0

5,000

Source: Company, HDFC sec Inst Research

FY17E

(5.0)

FY16E

3,000
16.8

2,500
2,000
1,500

17.4

17.4

17.1

16.1

1,000
500
0

17.6
17.4
17.2
17.0
16.8
16.6
16.4
16.2
16.0
15.8
15.6
15.4

FY17E

15.0

14,246

%
16.9

Rs mn

FY15E

11,871

20.0

3,500

EBITDA Margin - RHS

FY14

10,000

9,319

FY13

19,231
17,095
10,011

In our view, the key monitorable going forward will be

JKILs ability to execute larger and more complex
projects across geographies without compromising on
margins and maintain a healthy working capital cycle.
Smooth execution will enable the company to bid for
more projects in the long term and sustain double digit
profit growth beyond FY17E.

EBITDA
25.0

20,000

FY12

We assume a similar margin

trajectory of ~17% over FY1517E owing to the companys
policy of owning machines such
as TBMs (Tunnel Boring
Machines) and 15 RMC plants
that will enable it to keep
margins in check

FY12

Rs mn

15,000

We estimate PAT CAGR of 20% over FY14-17E and

expect JKIL to achieve RoEs of ~15% over FY15-17E
even after taking into account the dilution impact of
recent fund raising of Rs 1.4bn through QIP. Post the
recent QIP issue, we expect JKIL to maintain a healthy
net debt/equity ratio over FY15-17E.

YoY Growth

Revenues
25,000

FY16E

JKILs revenues to grow at 17% CAGR over FY14-17E

FY15E

We expect 17% revenue CAGR

for JKIL over FY14-17E.The
revenues will be driven largely
by execution on large ongoing
projects such as Delhi Metro
and Sion-Panvel road project

The management expects to sustain EBITDA margins at

over 15% in the medium term. With expansion in
business operations, JKIL will be able to benefit from
operating deleverage. Hence, we assume a similar
margin trajectory of ~17% over FY15-17E owing to the
companys policy of owning machines such as TBMs
(Tunnel Boring Machines) and 15 RMC plants that will
enable it to keep margins in check.

FY14

As highlighted earlier, JKILs order book largely consists

of transportation EPC projects. We expect revenues to
grow at 17% CAGR over FY14-17E to Rs 19.2bn. With a
book-to-bill ratio of 2.6x as of Mar-14 (excluding L1
orders of ~ Rs 10bn), JKIL has strong revenue visibility
over the medium term. Revenues will be driven largely
by execution on large ongoing projects such as Delhi
Metro and Sion-Panvel road project.

FY13

Source: Company, HDFC sec Inst Research

Page | 9

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

We expect JKILs net working

capital cycle to hover ~150
days over FY14-17E
Post the recent QIP issue, we
expect JKIL to maintain a
healthy net debt/equity ratio
over FY15-17E

7.4
7.1

7.3

800

7.2

6.7

7.0

23.0

15.0
13.0

200

6.4

11.0

6.2

9.0

16.7

16.2

15.6
14.0

FY12

6.6

FY17E

17.8

18.5

18.8

14.9

15.0

17.0

400

FY16E

19.4

19.0

6.8

FY15E

22.4

21.0

600

FY14

23.8

FY17E

1,000

7.6

7.4

7.6

1,200

7.8

RoCE (%)

FY16E

1,400

FY12

We expect JKIL to achieve

RoEs of ~15% over FY15-17E
led by incremental order
wins and strong execution

%
7.6

Rs mn

RoE (%)

25.0

FY15E

1,600

PAT Margin (RHS)

FY14

PAT

we expect return ratios to remain healthy over FY15-17E

FY13

JKILs PAT to grow at 20% CAGR over FY14-17E

FY13

We expect 20% PAT/EPS

CAGR for JKIL over FY14-17E

Source: Company, HDFC sec Inst Research

Source: Company, HDFC sec Inst Research

Working capital cycle to hover ~150 days

we expect gearing level to be comfortable over FY15-17E

Inventory
200

Debtors

Payables

Net Working Capital

Working Capital Days

Net Debt/Equity (x)

0.8

0.8
0.7

150

0.6

100

0.5

0.5
0.4

50

0.2

(50)

0.3

0.2

0.3

0.4

0.1

0.1
0.0

(100)
FY12

FY13

FY14

FY15E

Source: Company, HDFC sec Inst Research

FY16E

FY17E

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, HDFC sec Inst Research

Page | 10

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

Valuations & views

We initiate coverage on
JKIL with a BUY
recommendation and a TP
of Rs 422/sh (CMP Rs
319/sh)
We have valued JKILs EPC
business at Rs 422/sh on
10x P/E of average FY16-17
EPS (Sep-16) of Rs 42.2, in
line with multiples of mid
cap construction
companies.

We like JKIL because (1) strong EBITDA margin profile

of over 15%, (2) high revenue visibility with Mar-14
order book of Rs 31.5bn (2.6x FY14 revenues), (3)
strong balance sheet with net debt/equity of 0.5x post
the recent QIP of Rs 1.4bn (4) geographical and
segmental diversification of order book.

We have valued JKILs EPC business at Rs 422/sh on 10x

P/E of average FY16-17 EPS (Sep-16) of Rs 42.2, in line
with multiples of mid cap construction companies.

We initiate coverage on JKIL with a BUY

recommendation and a TP of Rs 422/sh (CMP Rs
319/sh).

Key risks

Slowdown in order intake : Although we believe that

the Governments focus on infrastructure spending will
sustain, any decrease in spending could affect order
intake.

Profitability risk : Historically, JKIL has enjoyed EBITDA

margins of over 15%. However, with a scale up in
execution across geographies that involve more
complex projects, JKIL may face challenges in
maintaining similar margins going ahead.

Delay in execution : Project delays due to land

acquisition or other regulatory bottlenecks could
adversely affect JKILs revenues going forward.

Concentration in transportation : With over 90% of

JKILs order book concentrated in the transportation
segment, significant cost competition and slowdown in
orders could affect JKILs revenue and margin profile in
the long term.

Page | 11

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

INCOME STATEMENT (STANDALONE)
(Rs mn)
Net Sales (post JV partner share)
Growth (%)
Material Expenses
Employee Expenses

BALANCE SHEET (STANDALONE)

FY13

FY14

FY15E

FY16E

FY17E

10,011

11,871

14,246

17,095

19,231

(Rs mn)
Share Capital

7.4

18.6

20.0

20.0

12.5

6,264

6,820

8,184

9,821

10,803

474

773

928

1,113

1,280

Minority Interest

FY13

FY14

FY15E

FY16E

FY17E

278

278

322

322

322

Reserves

4,756

5,475

7,642

8,757

10,051

Total Shareholders Funds

5,034

5,753

7,964

9,079

10,373

Other Operating Expenses

1,596

2,216

2,660

3,245

3,894

Long Term Debt

2,317

5,571

5,321

5,821

5,821

EBIDTA

1,678

2,062

2,474

2,916

3,254

Short Term Debt

46

EBIDTA (%)

16.8

17.4

17.4

17.1

16.9

Total Debt

2,363

5,571

5,321

5,821

5,821

EBIDTA Growth (%)

11.7

22.8

20.0

17.8

11.6

Deferred Taxes

51

71

71

71

71

89

108

119

131

144

Long Term Provisions & Others

TOTAL SOURCES OF FUNDS

7,449

11,395

13,356

14,971

16,265

Net Block

2,089

3,255

3,610

3,677

3,706

CWIP

1,013

1,752

1,752

1,752

1,752

Other Income
Depreciation
EBIT
Interest

244

348

395

433

470

1,523

1,822

2,197

2,613

2,928

APPLICATION OF FUNDS

406

576

763

724

757

PBT

1,116

1,246

1,435

1,889

2,171

Tax

354

402

474

623

716

PAT

762

844

961

1,266

1,455

23

33

43

53

Inventories

3,950

5,658

6,797

7,942

8,957

Debtors

1,147

1,320

1,610

1,932

2,239

Cash & Equivalents

1,119

1,212

1,501

1,945

2,213

789

1,420

1,610

1,932

2,239

Minority Interest
EO items (net of tax)

Goodwill
Investments, LT Loans & Advs

APAT

762

844

961

1,266

1,455

APAT Growth (%)

11.4

10.8

13.9

31.7

14.9

ST Loans & Advances, Others

EPS

27.2

30.2

29.8

39.3

45.1

Other Current Assets

1,476

1,890

2,390

2,890

3,390

EPS Growth (%)

11.3

11.0

(1.3)

31.7

14.9

Total Current Assets

8,480

11,500

13,907

16,641

19,038

Source: Company, HDFC sec Inst Research

Creditors

910

1,817

2,146

2,576

2,986

Other Current Liabilities & Provns

3,224

3,318

3,800

4,566

5,299

Total Current Liabilities

4,134

5,136

5,946

7,142

8,284

Net Current Assets

4,347

6,365

7,961

9,499

10,754

7,449

11,395

13,356

14,971

16,265

Misc Expenses & Others

TOTAL APPLICATION OF FUNDS

Source: Company, HDFC sec Inst Research

Page | 12

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

CASH FLOW : (STANDALONE)

(Rs mn)
Reported PAT
Non-operating & EO items

KEY RATIOS : (STANDALONE)

FY13

FY14

FY15E

FY16E

FY17E

762

844

961

1,266

1,455

FY13

FY14

FY15E

FY16E

FY17E

GPM

37.4

42.5

42.5

42.5

43.8

EBITDA Margin

16.8

17.4

17.4

17.1

16.9

PROFITABILITY (%)

PAT from Operations

762

844

961

1,266

1,455

Interest expenses

406

576

763

724

757

EBIT Margin

15.2

15.3

15.4

15.3

15.2

Depreciation

244

348

395

433

470

APAT Margin

7.6

7.1

6.7

7.4

7.6

(266)

(2,000)

(1,308)

(1,095)

(987)

RoE

16.2

15.6

14.0

14.9

15.0

Working Capital Change

OPERATING CASH FLOW ( a )

1,147

(232)

812

1,328

1,695

RoIC

23.4

20.4

18.8

19.5

19.8

(1,280)

(2,254)

(750)

(500)

(500)

RoCE

22.4

19.4

17.8

18.5

18.8

Free cash flow (FCF)

(133)

(2,485)

62

828

1,195

EFFICIENCY

Investments & Others

(204)

(234)

(10)

(10)

(10)

31.7

32.3

33.0

33.0

33.0

(1,483)

(2,488)

(760)

(510)

(510)

Asset Turnover (x)

1.3

1.0

1.1

1.1

1.2

122

148

160

157

160

37

38

38

38

40

Capex

INVESTING CASH FLOW ( b )

Share capital Issuance
Debt Issuance
Interest expenses

Tax Rate (%)

1,372

Inventory (days)

658

3,205

(250)

500

Debtors (days)

(406)

(576)

(763)

(724)

(757)

Payables (days)

26

42

51

50

53

Dividend

(73)

(113)

(122)

(151)

(160)

Cash Conversion Cycle (days)

133

144

146

145

147

FINANCING CASH FLOW ( c )

179

2,516

237

(375)

(917)

Debt/EBITDA (x)

1.4

2.7

2.2

2.0

1.8

NET CASH FLOW (a+b+c)

(158)

(204)

289

443

268

Net D/E

0.2

0.8

0.5

0.4

0.3

Non-operating and EO items

(747)

85

1,097

Interest Coverage

3.7

3.2

2.9

3.6

3.9

234

116

1,501

1,945

2,213

PER SHARE DATA

EPS (Rs/sh)

27.2

30.2

29.8

39.3

45.1

CEPS (Rs/sh)

36.2

42.9

42.1

52.7

59.7

Closing Cash
Source: Company, HDFC sec Inst Research

DPS (Rs/sh)
BV (Rs/sh)

3.5

3.8

4.0

4.3

4.5

181.1

206.9

247.1

281.7

321.9

11.7

10.6

10.7

8.1

7.1

1.8

1.5

1.3

1.1

1.0

VALUATION
P/E
P/BV
EV/EBITDA

6.0

6.4

5.7

4.9

4.3

OCF/EV (%)

11.3

(1.8)

5.8

9.4

12.2

FCF/EV (%)

(1.3)

(18.8)

0.4

5.8

8.6

FCFE/Mkt Cap (%)

1.3

1.6

(9.2)

5.9

4.3

Dividend Yield (%)

1.1

1.2

1.3

1.3

1.4

Source: Company, HDFC sec Inst Research

Page | 13

J. KUMAR INFRAPROJECTS : INITIATING COVERAGE

Rating Definitions
BUY

Where the stock is expected to deliver more than 10% returns over the next 12 month period

NEUTRAL

Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period

SELL

Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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Page | 14