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Anand Rathi
JMC Projects (Buy)
CMP: ₹679.75
Target: ₹732
JMC Projects (India) Ltd is an India-based engineering and construction services company. The company is engaged in the construction of buildings and others. It executes various types of projects involving construction services that include design, procurement, supply, installation, testing and commissioning.
Labour issues constrained JMC’s revenue growth in Q4 FY18, but healthy margins and contained finance costs helped to inspiring earnings growth. Ahead, we expect equally inspiring growth as the order backlog is healthy, inflow prospects bright and the cash flow mismatch for BOT-toll operations expected to be down. We retain our Buy rating due to the strong momentum in core operations and efforts to render the BOT (build-operate-transfer) portfolio self-sustaining.
Valuation: Taking into account actuals for FY18 and as we incorporate the better guided to margins,we raise FY19e earnings about 5 per cent (and about 3 per cent for FY20). The sum-of-parts-based target price, consequently, increases to ₹732 (from ₹710 earlier).
Risk: Slower-than-expected pace of execution.
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