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CD Equisearch
J Kumar Infraprojects (Buy)
CMP: ₹210
Target: ₹273
J Kumar Infraprojects is engaged in construction activities. The company designs and constructs roads, bridges, flyovers, subways, over-bridges, skywalks and railway terminus/stations, among others.
Somewhat aggravated by shortage of RMC in Mumbai — fallout of the mining ban — J Kumar Infraproject’s income from operations plunged 7.2 per cent last quarter — nosedived 12 per cent (y-o-y) in Q4 too. Consequently, OPMs fell to the lowest level in five quarters.
Execution of colossal orders (Mumbai Metro Line 2 & Line 3) patently benefits from efficient resource mobilisation but not without unforeseen delays from externalities, be it procurement of machines to material shortfalls to cost overruns to unexpected changes in project designs. With majorly sorting out of utility issues at JNPT road projects and ramp-up in Mumbai Metro Line 2 & 3 orders, overall order billing would patently revive. Apprised of near-term risks, we retain our buy recommendation with a revised target of ₹273 (previous target: ₹306) based on 14xFY19e earnings over a period of 9-12 months (peg ratio: 0.7).
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