YES Securities is bullish on JMC Projects (India) has recommended buy rating on the stock with a target price of Rs 50 in its research report dated May 21, 2020.
YES Securities' research report on JMC Projects (India)
JMC Projects delivered muted topline performance during Q4 FY20 with standalone revenues at Rs.9.4 bn (flat yoy). This was largely impacted by COVID-19 related shutdown during March. Nearly 10-12 days of execution was impacted. At the operating level, margin improved to 11.3%. This was primarily due to superior segment mix in execution. During the quarter, the company booked an impairment loss of Rs.795mn towards loans/advances given to BOT subsidiary Kurukshetra Expressway Pvt Ltd. This led to a reported net loss of Rs.344mn during Q4 FY20. The Company received Rs.33.6 bn worth of orders during FY20 and closed the year with order book of Rs.95 bn. The Company has been trying to exit couple of its BOT Road assets. However, no progress has been achieved on that front. The toll revenues have been impacted due to toll stoppage during last week of March. JMC has managed to reduce its Net debt during Q4 FY20 to Rs.7.4bn (down Rs.1.3 bn yoy). Despite strong order book we expect revenues to be under pressure in FY21 as April has been significantly impacted in terms of execution and going forward the ramp up would be very gradual. Shortage of labor and some exposure to real estate would impact near term execution. The margin is likely to stay at ~10.5% levels.
Outlook
The execution mix is likely to be driven by B&F segment (60%) and balance by Infra segment. Considering the COVID impact on topline and margins, we cut our estimates for FY21 and FY22. Also, with no near-term visibility on asset monetization, we believe the Company would need to support the subsidiaries which may be an overhang on the stock. Post the sharp correction in stock price, we maintain our BUY rating on the stock for revised target of Rs.50 (based on SOTP valuation).
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