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Please refer to important disclosures at the end of this report 1
EBITDA 57 68 (15.8) 64 (10.6)
EBITDA margin (%) 9.7 10.8 (111)bp 9.8 (13)bp
Source: Company, Angel Research
Jyoti Structures (Jyoti)’s 2QFY2013 performance was below our expectations, with
the top-line declining by 6.2% yoy to ` 593cr. The company’s EBITDA came in at
` 57cr, 15.8% lower yoy. The EBITDA margin contracted 111bps following tough
competition in the sector and is presently at 9.7%. Jyoti’s interest coverage
multiple remains under stress, declining from 2.6x in 1QFY2012 to 1.6x
presently. The increase in receivables has led to higher working capital
borrowing, elevating the interest cost. Consequently, the PAT declined by 46.0%
yoy to ` 12cr.
The company reported a strong order inflow of ` 801cr in
2QFY2013. The order flow from Power Grid Corporation of India (PGCIL) is
expected to retain traction; we therefore see order inflows for Jyoti to remain
stable. Jyoti’s order backlog stood at ` 4,800cr up 9.7% yoy. However the
company’s order coverage has been lower at 1.7x over the past few quarters. The
order backlog was spread across transmission (60%), substation (25%) and
distribution (15%) segments. Client-wise, the backlog mainly constituted of orders
by PGCIL (29%), West Bengal (15%), Maharashtra (12%), MP (6%), overseas (15%)
and the private sector (5%). The company received major orders from Kenya and
Uganda which boosted its overseas segment’s contribution to the top-line.
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 valuations,
% chg 12.7 11.6 4.3 9.1
% chg 18.4 (8.0) (17.6) 27.1
EBITDA (%) 11.2 11.0 10.6 10.6
P/E (x) 3.6 3.9 4.7 3.7
P/BV (x) 0.6 0.5 0.5 0.4
RoE (%) 18.7 14.9 10.9 12.5
RoCE (%) 25.4 19.6 16.0 17.2
EV/Sales (x) 0.3 0.5 0.4 0.4
EV/EBITDA (x) 2.9 4.1 3.7 3.4
Source: Company, Angel Research
CMP ` 44
Target Price ` 53
Investment Period 12 Months
Stock Info
Sector
Net Debt ( ` cr) 841
Bloomberg Code JYS@IN
Shareholding Pattern (%)
Promoters 27.8
MF / Banks / Indian Fls 17.8
FII / NRIs / OCBs 14.3
Indian Public / Others 40.2
Abs. (%) 3m 1yr 3yr
Sensex 6.4 7.6 13.2
JYS 13.8 (28.1) (69.7)
Reuters Code JYTS.BO
BSE Sensex 18,684
Nifty 5,686
Avg. Daily Volume 110,340
Face Value ( ` ) 2
Beta 1.4
52 Week High / Low 60/35
Capital Goods
Market Cap ( ` cr) 359
022-39357800 Ext: 6839
Performance Highlights
2QFY2013 Result Update | Capital Goods
November 9, 2012
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 2
Exhibit 1: Quarterly performance (Standalone)
Other operating income 1 0 1 - 2 - -
Stock adjustments 4 5 10 15 (13)
Raw Material 320 353 (9.4) 350 (8.6) 669 741 (9.7)
(% of total income) 54.6 56.6 55.0 54.8 57.4
Erection and sub contracting exp. 125 125 (0.1) 147 (15.3) 272 244 11.1
(% of total income) 21.0 19.7 22.5 21.8 19.3
Employee Cost 23 20 11.4 23 (0.4) 46 40 13.7
(% of total income) 3.8 3.2 3.5 3.7 3.2
Other Expenses 64 61 5.6 61 6.0 125 119 5.5
(% of total income) 10.8 9.6 9.3 10.0 9.3
(EBITDA %) 9.7 10.8 9.8 9.7 10.9
Interest 35 31 13.6 34 3.9 69 58 19.2
Depreciation 6 6 12.4 6 1.4 12 11 12.3
Other Income 1 2 (68.0) 2 (69.5) 3 3 -
(% of total income) 3.0 5.3 4.0 3.4 5.7
Total Tax 6 11 (46.3) 8.7 (30) 15 24 (38.9)
(% of PBT) 33.6 33.7 33.4 34.7 33.3
(PAT %) 2.0 3.5 2.6 4.1 6.5
Source: Company, Angel Research
Exhibit 2: Actual vs Estimates
EBITDA 57 65 (12.1)
12 18 (33.5)
Source: Company, Angel Research
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 3
Revenue declines by 6.2% yoy
Jyoti’s revenues were below our expectations, declining by 6.2% yoy to ` 592cr
on account of slower execution. The company’s EBITDA came in at ` 57cr, 15.8%
lower yoy. The EBITDA margin contracted 111bps following tough competition in
the sector and is presently at 9.7%. We expect the company to continue to operate
at these levels over the coming quarters. Consequently, the PAT declined by 46.0%
yoy to ` 12cr
Exhibit 3: Trend in revenues
Source: Company, Angel Research
Exhibit 4: Trend in EBITDA
Source: Company, Angel Research
Interest cost pressure remains…
Jyoti’s interest coverage multiple remains under stress, declining from 2.6x in
1QFY2012 to 1.6x presently. The increase in receivables has led to higherborrowing, thus elevating the interest cost. In light of the deteriorating working
capital cycle (higher levels of working capital borrowing), we expect interest costs
to remain elevated going forward.
Exhibit 5: Interest coverage ratio
Source: Company, Angel Research
Exhibit 6: Trend in PAT
Source: Company, Angel Research
5 4 2
5 5 1
7 2 2
6 3 8
6 3 2
5 8 7
7 3 5
6 5 5
5 9 3
14.7 7.9
31.8
13.0 16.5 6.5
1.92.7
(6.2)
-10
-5
05
10
15
20
25
30
35
0
100
200300
400
500
600
700
800
2 Q F Y 1 1
3 Q F Y 1 1
4 Q F Y 1 1
1 Q F Y 1 2
2 Q F Y 1 2
3 Q F Y 1 2
4 Q F Y 1 2
1 Q F Y 1 3
2 Q F Y 1 3
Sales (` cr, LHS) Growth (yoy %, RHS)
6 3
6 3
8 4
7 0
6 8
5 9
8 2
6 4
5 7
11.6 11.4 11.611.0 10.8
10.111.2
9.8 9.7
0
2
4
6
8
10
12
14
0
10
2030
40
50
60
70
80
90
2 Q F Y 1 1
3 Q F Y 1 1
4 Q F Y 1 1
1 Q F Y 1 2
2 Q F Y 1 2
3 Q F Y 1 2
4 Q F Y 1 2
1 Q F Y 1 3
2 Q F Y 1 3
EBITDA (` cr, LHS) EBITDAM (%, RHS)
3.23.1
3.0
2.5 2.6
2.2
1.7
2.0 1.9
1.6
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
3.1
3.3
1 Q F Y 1 1
2 Q F Y 1 1
3 Q F Y 1 1
4 Q F Y 1 1
1 Q F Y 1 2
2 Q F Y 1 2
3 Q F Y 1 2
4 Q F Y 1 2
1 Q F Y 1 3
2 Q F Y 1 3
2 5
2 5
3 5
2 6
2 2
1 4
3 1
1 7
1 2
4.6 4.54.8
4.1
3.5
2.4
4.3
2.6
2.0
0
1
2
3
4
5
6
-
5
10
15
20
25
30
35
40
2 Q F Y 1 1
3 Q F Y 1 1
4 Q F Y 1 1
1 Q F Y 1 2
2 Q F Y 1 2
3 Q F Y 1 2
4 Q F Y 1 2
1 Q F Y 1 3
2 Q F Y 1 3
Adj. PAT (` cr, LHS) PATM (%, RHS)
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 4
Order flows remain stable
The company reported a strong order inflow of ` 801cr in 2QFY2013. The order
flow from PGCIL is expected to retain traction; we therefore see order inflows for
Jyoti to remain stable. Jyoti’s order backlog stood at ` 4,800cr up 9.7% yoy.
However the companies order coverage has been lower at 1.7x over the past few
quarters. The order backlog was spread across transmission (60%), substation
(25%) and distribution (15%) segments. Client wise, the backlog mainly constituted
of orders by PGCIL (29%), West Bengal (15%), Maharashtra (12%), Madhya
Pradesh (6%), overseas (15%) and private sector (5%). The company received
major orders from Kenya and Uganda which boosted its overseas segment’s
contribution to the top-line.
Exhibit 7: Order Book coverage ratio
Source: Company, Angel Research
Exhibit 8: Order backlog growth
Source: Company, Angel Research
2.0
1.91.9
1.8
1.7
1.7 1.7
1.81.7
1.5
1.6
1.6
1.7
1.7
1.8
1.8
1.9
1.9
2.02.0
2 Q F Y 1 1
3 Q F Y 1 1
4 Q F Y 1 1
1 Q F Y 1 2
2 Q F Y 1 2
3 Q F Y 1 2
4 Q F Y 1 2
1 Q F Y 1 3
2 Q F Y 1 3
4 , 2
5 0
4 , 1
0 0
4 , 5
0 0
4 , 4
7 0
4 , 3
7 5
4 , 3
0 0
4 , 3
4 0
4 6 0 0
4 8 0 0
9.8
1.7
8.4 8.9
2.94.9
(3.6)
2.9
9.7
-8
-3
2
7
12
17
3,600
3,800
4,000
4,200
4,400
4,600
4,8005,000
2 Q F Y 1 1
3 Q F Y 1 1
4 Q F Y 1 1
1 Q F Y 1 2
2 Q F Y 1 2
3 Q F Y 1 2
4 Q F Y 1 2
1 Q F Y 1 3
2 Q F Y 1 3
Order backlog Growth (yoy %, RHS)
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 5
Investment arguments
Globally the thumb rule entails that for every rupee
invested in generation, an equivalent amount is to be invested in transmission and
distribution (T&D). However, India has spent only 50% on T&D of what has been
spent on generation in recent years, thus creating a huge opportunity for players in
the T&D space. PGCIL has envisaged a T&D capex of ` 1 lakh cr for the 12th plan,
55% of which is expected to be deployed in transmission and substation projects,
thus providing an array of opportunities to Jyoti, given its strong foothold in the
T&D segment.
Jyoti has been actively tapping the
overseas markets by entering into JVs in South Africa and the Gulf. In addition, the
company recently forayed into the US by setting up a transmission tower plant
(revenue potential of ~ ` 340cr annually - @100% capacity utilization). We believe
these ventures will benefit the company in the long run, thereby insulating it from
domestic headwinds.
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 valuations,
Exhibit 9: Peer comparison
ABB* Sell 729 593 (18.7) 5.5 4.8 50.4 29.5 68.4 11.6 17.6
BHEL Neutral 232 - - 2.8 2.4 9.4 10.6 (13.2) 33.5 24.5
BGR Energy Neutral 266 - - 1.5 1.4 10.6 9.5 (5.3) 31.1 27.1
Crompton Greaves Buy 113 145 28.3 1.9 1.7 28.4 14.6 15.5 6.9 12.6
KEC International Accum 64 73 14.9 1.3 1.1 8.9 7.0 5.8 22.0 23.2
Thermax Neutral 594 - - 3.8 3.3 21.1 19.1 (4.1) 19.2 18.5
Source: Company, Angel Research;*Note: December year ending
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 6
Exhibit 10: One year forward PE Band
Source: Company, Angel Research
Company background
Jyoti is one of the leading EPC players in the transmission line and substation
segments with business presence across transmission line towers, substation and
rural electrification. The company offers a wide range of services in design,
engineering, tower testing, manufacturing, construction and project management.
In addition to its strong domestic presence, Jyoti is also exploring T&D capex
opportunities on the global front through recent overseas JVs and investments
(Jyoti America and Gulf Jyoti).
0
70
140
210
280
350
O c t - 0 6
J a n - 0
7
A p r - 0 7
J u l - 0 7
O c t - 0 7
J a n - 0
8
A p r - 0 8
J u l - 0 8
O c t - 0 8
J a n - 0
9
A p r - 0 9
J u l - 0 9
O c t - 0 9
J a n - 1
0
A p r - 1 0
J u l - 1 0
O c t - 1 0
J a n - 1
1
A p r - 1 1
J u l - 1 1
O c t - 1 1
J a n - 1
2
A p r - 1 2
J u l - 1 2
O c t - 1 2
( ` )
Share Price (`) 3x 7x 11x 15x
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 8
Balance sheet (Consolidated)
Equity Share Capital 16 16 16 16 16 16Preference Capital 0 0 0 0 0 0
Shareholders’ Funds 419 491 576 660 724 811
Minority Interest 0 0 0 1 1 1
Total Loans 313 369 477 918 813 813
Deferred Tax Liability 9 18 18 125 125 125
Gross Block 190 244 283 324 364 419
Less: Acc. Depreciation 55 69 87 100 127 158
Capital Work-in-Progress 4 2 8 169 249 199
Goodwill 0 0 0 0 0 0
Investments 17 17 17 22 17 17
Deferred Tax Asset 0 0 0 0 0 0
Cash 39 54 67 54 81 74
Loans & Advances 228 185 180 222 220 252
Inventories 153 247 231 295 269 280
Debtors 712 863 1,093 1,569 1,294 1,403
Others 0 0 0 60 0 0
Current liabilities 550 665 722 911 701 735
Mis. Exp. not written off 1 0 0 0 0 0
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
previous year numbers
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 9
Cash Flow statement (consolidated)
Depreciation 10 18 21 23 27 31(Inc)/Dec in Working Capital (70) (86) (152) (332) 153 (119)
Less: Other income (6) (6) (5) (8) (7) (9)
Direct taxes paid (49) (53) (56) (43) (36) (46)
(Inc.)/Dec.in Fixed Assets (80) (58) (50) (224) (120) (5)
(Inc.)/Dec. in Investments (7) 0 0 -5 5 0
Other income 6 6 5 8 7 9
Issue of Equity 0.1 0.1 0.0 0 0.0 0.0
Inc./(Dec.) in loans 88 56 108 441 (105) 0
Dividend Paid (Incl. Tax) (9) (10) (14) (10) (10) (10)
Others 7 10 2
Inc./(Dec.) in Cash 25 15 13 (13) 27 (6)
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
previous year numbers
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 10
Key ratios
P/E (on FDEPS) 4.2 4.3 3.6 3.9 4.7 3.7P/CEPS 3.8 3.5 3.0 3.1 3.5 2.8
P/BV 0.9 0.7 0.6 0.5 0.5 0.4
Dividend yield (%) 2.1 2.3 3.4 2.3 2.3 2.3
EV/Sales 0.3 0.3 0.3 0.5 0.4 0.4
EV/EBITDA 3.0 2.9 2.9 4.1 3.7 3.4
EV / Total Assets 0.9 0.8 0.7 0.7 0.7 0.6
OB/Sales 2.0 1.9 1.9 1.6 1.6 0.0
EPS (Basic) 10.4 10.3 12.1 11.2 9.2 11.7
EPS (fully diluted) 10.4 10.3 12.1 11.2 9.2 11.7
Cash EPS 11.6 12.5 14.7 14.0 12.5 15.5
DPS 0.9 1.0 1.5 1.0 1.0 1.0
Book Value 51.3 59.8 70.1 80.3 88.2 98.7
EBIT margin 10.7 9.9 10.3 10.2 9.6 9.6
Tax retention ratio (%) 63.3 61.3 63.9 68.4 67.5 67.5
Asset turnover (x) 2.9 2.8 2.6 2.0 1.7 1.9
RoIC (Pre-tax) 31.5 27.7 27.0 20.6 16.7 18.0
RoIC (Post-tax) 19.9 17.0 17.3 14.1 11.3 12.1
Cost of Debt (Post Tax) 16.2 14.3 14.4 14.1 12.8 13.2
Leverage (x) 0.6 0.6 0.7 1.0 1.1 1.0
Operating ROE 22.4 18.7 19.2 14.0 9.5 11.1
RoCE (Pre-tax) 30.2 26.1 25.4 19.6 16.0 17.2
Angel RoIC (Pre-tax) 31.7 27.8 27.2 22.0 19.2 20.8
RoE 22.6 18.6 18.7 14.9 10.9 12.5
Asset Turnover (Gross Block) (X) 12.1 9.8 9.1 8.8 8.1 7.8
Inventory / Sales (days) 23 34 36 36 37 33
Receivables (days) 120 135 149 181 187 161
Payables (days) 91 111 113 117 110 89 WC cycle (ex-cash) (days) 101 101 107 137 151 137
Net debt to Equity 0.7 0.6 0.7 1.3 1.0 0.9
Net debt to EBITDA 1.3 1.4 1.5 2.9 2.5 2.3
Interest Coverage 2.9 2.6 2.6 1.9 1.6 1.8
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with
previous year numbers
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Jyoti Structures | 2QFY2013 Result Update
November 9, 2012 11
Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com
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such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
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risks of such an investment.
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investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
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Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
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Disclosure of Interest Statement Jyoti Structures
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)