Jyoti Structures 4Q FY 2013

8/22/2019 Jyoti Structures 4Q FY 2013

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Please refer to important disclosures at the end of this report 1

Quarterly Highlights (Standalone)(` cr) 4QFY13 4QFY12 % chg (yoy) 3QFY13 % chg (qoq)Revenue 939 736 27.5 620 51.4EBITDA 99 83 19.5 63 58.3

EBITDA margin (%) 10.6 11.3 (71) 10.1 46

Reported PAT 22 31 (29.3) 13 65.6Source: Company, Angel Research

For 4QFY2013, Jyoti Structures (Jyoti)s top-line performance was much better

than our estimates, growing by 27.5% yoy to `939cr on account of strong

execution. However, PAT declined by 29.3% yoy to `22cr, primarily on account of

elevated interest costs (since increase in receivables led to higher working capitalborrowing). Jyotis interest coverage multiple remains under stress, declining from

2.0x in 4QFY2012 to 1.6x presently.

Healthy order backlog: The company reported a healthy order inflow of `1,100crin 4QFY2013, taking its total order backlog to `4800cr, implying an order

backlog to sales ratio of 1.7x. The order backlog is spread across transmission

(79%), substation (10%) and rural electrification (11%) segments. Client-wise, the

backlog mainly comprised of orders by PGCIL (27%), West Bengal (17%),

Maharashtra (12%), Madhya Pradesh (6%) and overseas (25%). The company

reported good ordering from countries such as Egypt, Kazakhstan, Kenya and

Namibia, among others, which boosted its overseas segments contribution to order

book. The Management has guided at an order visibility of ~6,000cr for 1QFY2014.

Deteriorating working capital cycle remains key concern: The debtor dayscontinue to be as high as 230 days, mainly due to pending receivables to the tune

of ~`400cr plus from Maharashtra, Tamil Nadu and Rajasthan discoms. In light

of the deteriorating working capital cycle (higher levels of working capital

borrowing), we expect interest costs to remain elevated going forward. The

Management expects increase in focus on overseas business and execution of

some of the slow-moving domestic orders to aid in improving the companys

working capital cycle.

Outlook and valuation: The company is witnessing improvement in execution andhas a healthy order book, but the deteriorating working capital cycle remains the

key concern. We believe, interest cost will remain at elevated levels going

forward, dragging Jyotis profitability. Therefore, we recommend a Neutral ratingon the stock, even though the stock is currently trading at a cheap valuation of2.6x our FY2015E EPS.Key financials (Consolidated)Y/E March (` cr) FY2012 FY2013E FY2014E FY2015ENet sales 2,678 3,015 3,360 3,597% chg 11.6 12.6 11.5 7.0

Net profit 92 38 60 84% chg (8.0) (58.2) 56.7 38.8

EBITDA (%) 11.0 9.0 9.7 9.8

EPS (`) 11.2 4.7 7.3 10.2P/E (x) 2.4 5.7 3.7 2.6

P/BV (x) 0.3 0.8 0.7 0.7RoE (%) 16.2 6.1 8.8 11.4

RoCE (%) 24.8 16.5 17.5 18.5

EV/Sales (x) 0.3 0.3 0.3 0.3

EV/EBITDA (x) 2.5 3.9 3.1 3.0

Source: Company, Angel Research

NEUTRALCMP `27

Target Price -

Investment Period -

Stock Info

Sector

Net Debt (`cr) 816

Bloomberg Code JYS@IN

Shareholding Pattern (%)

Promoters 27.8

MF / Banks / Indian Fls 19.3

FII / NRIs / OCBs 12.7

Indian Public / Others 40.3

Abs. (%) 3m 1yr 3yr

Sensex 3.5 22.4 14.2

JYS (16.9) (30.0) (81.4)

Reuters Code JYTS.BO

BSE Sensex 19,546

Nifty 5,919

Avg. Daily Volume 59,846

Face Value (`) 2

Beta 1.3

52 Week High / Low 53/26

Capital Goods

Market Cap (`cr) 220

Amit Patil022-39357800 Ext: 6839

[email protected]

Jyoti StructuresPerformance Highlights

4QFY2013 Result Update | Capital Goods

June 4, 2013


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Jyoti Structures| 4QFY2013 Result Update

June 4, 2013 2

Exhibit 1:Quarterly performance (Standalone)

(` cr) 4QFY13 4QFY12 % chg (yoy) 3QFY13 % chg (qoq) FY2013 FY2012 % chg (yoy)Net Sales 937 735 27.5 619 51.5 2,802 2,592 8.1Other operating income 1 1 1 - 4 1 -Total income 939 736 27.5 620 51.4 2,806 2,593 8.2Stock adjustments (13) (45) 4 6 (65)

Raw Material 684 415 65.0 371 84.3 1,725 1,432 20.5

(% of total income) 71.5 50.2 2124.5 60.6 61.7 52.7

Erection and sub contracting exp. 65 182 (64.2) 109 (40.7) 446 592 (24.7)

(% of total income) 6.9 24.7 (1774.2) 17.7 15.9 22.8

Employee Cost 19 20 (4.3) 20 (4.4) 85 79 6.8

(% of total income) 2.0 2.7 3.2 3.0 3.1

Other Expenses 85 82 3.2 52 62.6 262 274 (4.4)

(% of total income) 9.0 11.1 (211.8) 8.4 9.3 10.6

Total Expenditure 839.5 653.2 28.5 557.1 50.7 2,523 2,312.5 9.1EBITDA 99 83 19.5 63 58.3 283 281 0.9(EBITDA %) 10.6 11.3 10.1 10.1 10.8

Interest 61 40 51.6 38 60.4 169 141 19.7

Depreciation 7 4 47.8 6 6.4 25 21 17.9

Other Income 3 5 (42.2) 2 30.1 9 10 -

PBT 34 43 (20.6) 20 67.4 98 129 (23.9)(% of total income) 3.6 5.8 3.3 3.5 5.0

Total Tax 12 11 3.9 6.8 71 33 43 (23.2)

(% of PBT) 34.2 26.1 33.5 33.7 33.5

Reported PAT 22 31 (29.3) 13 65.6 65 86 (24.2)(PAT %) 2.4 4.3 2.2 3.8 6.0

EPS (`) 2.7 3.8 1.6 65.6 7.9 10.4 (24.0)Source: Company, Angel Research


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June 4, 2013 3

Exhibit 2:Trend in revenues


Exhibit 3:Trend in EBITDA


Robust top-line growth, but higher interest cost drags downPAT

For 4QFY2013, Jyotis top-line performance was much better than our estimates,

growing by 27.5% yoy to `939cr. The growth was on the back of strong execution.

However, the PAT declined by 29.3% yoy to `22cr, primarily on account of

elevated interest costs (since increase in receivables led to higher working capital

borrowing). Jyotis interest coverage multiple remains under stress, declining from

2.0x in 4QFY2012 to 1.6x presently.

Exhibit 4:Interest coverage ratio


Exhibit 5:Trend in PAT


Deteriorating working capital cycle remains key concern

The debtor days continue to be as high as 230 days, mainly due to pending

receivables to the tune of ~`400cr plus from Maharashtra, Tamil Nadu and

Rajasthan discoms. In light of the deteriorating working capital cycle (higher levels

of working capital borrowing), we expect interest costs to remain elevated going

forward. The Management expects increase in focus on overseas business and

execution of some of the slow-moving domestic orders to aid the company to

improve its working capital cycle.

722

638

632

587

736

655

593

620

939

31.8

13.0 16.56.5

2.0

2.7 (6.2) 5.5

27.5

-10

-5

0

5

10

15

20

25

30

35

0

100

200

300

400

500

600700

800

900

1000

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

Sales (` cr, LHS) Growth (yoy %, RHS)

84

70

68

59

83

64

57

63

99

11.611.0 10.8

10.111.3

9.8 9.7 10.110.6

0

2

4

6

810

12

14

0

20

40

60

80

100

120

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

EBITDA (` cr, LHS) EBITDAM (%, RHS)

2.5 2.6

2.2

1.7

2.0

1.9

1.6 1.6 1.6

1.5

1.7

1.9

2.1

2.3

2.5

2.7

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

35

26

22

14

31

17

12

13

22

4.8

4.1

3.5

2.4

4.3

2.6

2.0 2.2

2.4

0

1

2

3

4

5

6

-

5

10

15

20

25

30

3540

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

Adj. PAT (` cr, LHS) PATM (%, RHS)


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June 4, 2013 4

Healthy order inflow and backlog

The company reported a healthy order inflow of `1,100cr in 4QFY2013, taking

the total order backlog to `4800cr, implying an order backlog to sales ratio of

1.7x. The order backlog is spread across transmission (79%), substation (10%) and

rural electrification (11%) segments. Client-wise, the backlog mainly comprised of

orders by PGCIL (27%), West Bengal (17%), Maharashtra (12%), Madhya Pradesh

(6%) and overseas (25%). The company reported good ordering from countries such

as Egypt, Kazakhstan, Kenya and Namibia, among others, which boosted its

overseas segments contribution to the order book. The Management has guided at

an order visibility of ~6,000cr for 1QFY2014.

Exhibit 6:Order Book coverage ratio


Exhibit 7:Order backlog growth


Investment arguments

Growth opportunity on cards: Globally the thumb rule entails that for every rupeeinvested 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 12 th plan,

55% of which is expected to be deployed in transmission and substation projects,

thus providing an array of opportunities for Jyoti, given its strong foothold in the

T&D segment.

Diversification to gradually materialize: Jyoti has been actively tapping theoverseas 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.

Outlook and valuation: In spite of improvement in execution and a healthy orderbook, deteriorating working capital cycle remains a key concern. We expect

interest costs to remain at elevated levels going forward, thus dragging Jyotis

profitability. Therefore, we recommend a Neutral rating on the stock, even though

the stock is currently trading at a cheap valuation of 2.6x our FY2015E EPS.

1.9

1.8

1.7

1.7 1.7

1.8

1.9

1.8

1.7

1.5

1.6

1.6

1.7

1.7

1.8

1.8

1.9

1.9

2.0

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

4,5

00

4,4

70

4,3

75

4,3

00

4,3

40

4600

4800

4605

4800

8.4 8.9

2.94.9

(3.6)

2.9

9.7

7.1

10.6

-8

-3

2

7

12

17

4,000

4,100

4,200

4,300

4,400

4,500

4,6004,700

4,800

4,900

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

Order backlog Growth (yoy %, RHS)


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June 4, 2013 5

Exhibit 8:Peer comparison

Company Reco. CMP Tgt. price Upside P/BV(x) P/E(x) FY2013-15E RoE (%)(`) (`) (%) FY14E FY15E FY14E FY15E EPS CAGR FY14E FY15E

ABB* Sell 643 461 (28.3) 5.1 4.9 55.8 37.9 61.6 9.3 13.1BHEL Neutral 196 - - 2.1 1.9 9.5 12.2 (23.3) 23.5 16.1

BGR Energy Neutral 164 - - 0.9 0.8 7.6 5.8 12.3 22.3 23.4

Crompton Greaves Buy 91 117 28.8 1.5 1.4 13.7 10.2 - 11.4 14.0

JSL Neutral 27 - - 0.7 0.7 3.7 2.6 47.5 8.6 11.0KEC International Buy 42 63 50.0 0.9 0.8 6.9 4.9 83.5 20.2 23.0

Thermax Neutral 578 - - 3.3 2.9 19.4 17.5 10.7 17.9 17.4

Source: Company, Angel Research;*Note: December year ending

Exhibit 9:One year forward PE Band


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

50

100

150

200

250

300

350

Ja

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7

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7

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7

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y-0

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n-1

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Share Price (`) 4x 8x 12x 16x


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June 4, 2013 6

Profit and loss statement (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013E FY2014E FY2015EOperating income 2,130 2,400 2,678 3,015 3,360 3,597% chg 15.8 12.7 11.6 12.6 11.5 7.0Total Expenditure 1,901 2,132 2,383 2,745 3,034 3,244Raw Materials 1,250 1,345 1,370 1,779 1,865 1,996

Mfg costs 378 459 620 493 709 759

Personnel Costs 72 77 101 155 124 133

Other Costs 201 250 292 317 336 356

EBITDA 229 268 295 270 326 352% chg 10.2 17.2 10.1 (8.5) 20.7 8.1

(% of Net Sales) 10.7 11.2 11.0 9.0 9.7 9.8

Depreciation& Amortization 18 21 23 36 37 41

EBIT 211 247 272 234 289 311

% chg 6.7 17.1 10.2 (13.8) 23.2 7.8

(% of Net Sales) 9.9 10.3 10.2 7.8 8.6 8.7

Interest & other Charges 80 96 144 182 209 197

Other Income 6 5 8 3 9 9

(% of PBT) 4.6 3.1 5.5 5.2 10.1 7.3

Recurring PBT 138 156 136 55 89 124% chg 2.3 13.5 (12.9) (59.4) 61.4 38.8

Extraordinary Expense/(Inc.) 1 0 0 0 0 0

PBT (reported) 137 156 136 55 89 124Tax 53 56 43 17 29 40

(% of PBT) 38.7 36.1 31.6 31.5 32.5 32.5

PAT (reported) 83 100 93 38 60 84Add: Share of earnings of asso. 0 0 0 0 0 0

Less: Minority interest (MI) 0 0 1 (1) 0 0

Prior period items 0 (0) 0 0 0 0

PAT after MI (reported) 83 100 92 38 60 84ADJ. PAT 84 100 92 38 60 84% chg (0.9) 18.4 (8.0) (58.2) 56.7 38.8

(% of Net Sales) 4.0 4.2 3.4 1.3 1.8 2.3

Basic EPS (`) 10.3 12.1 11.2 4.7 7.3 10.2Fully Diluted EPS ( ) 10.3 12.1 11.2 4.7 7.3 10.2% chg (1.3) 18.2 (8.0) (58.2) 56.7 38.8

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable withprevious year numbers


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June 4, 2013 7

Balance sheet (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013E FY2014E FY2015ESOURCES OF FUNDSEquity Share Capital 16 16 16 41 41 41Preference Capital 0 0 0 0 0 0

Reserves & Surplus 475 560 644 667 703 763Shareholders Funds 491 576 660 709 745 804

Minority Interest 0 0 1 1 1 1

Total Loans 369 449 581 922 892 895

Deferred Tax Liability 18 18 12 60 60 60

Total Liabilities 878 1,071 1,423 1,691 1,697 1,759APPLICATION OF FUNDSGross Block 244 283 325 445 500 555

Less: Acc. Depreciation 69 87 106 142 179 220

Net Block 175 196 219 303 321 335Capital Work-in-Progress 2 8 177 182 184 188

Goodwill 0 0 0 0 0 0

Investments 17 17 22 53 53 57

Deferred Tax Asset 0 0 0 0 0 0

Current Assets 1,350 1,572 2,141 2,484 2,591 2,720Cash 54 67 54 54 65 35

Loans & Advances 185 181 220 263 264 264

Inventories 247 231 295 281 285 305

Debtors 863 1,093 1,569 1,887 1,976 2,116

Others 0 0 4 0 0 0

Current liabilities 665 764 1,085 1,225 1,324 1,414

Net Current Assets 684 808 1,057 1,111 1,118 1,157Mis. Exp. not written off 0 42 56 42 42 42

Total Assets 878 1,071 1,423 1,691 1,697 1,759Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

previous year numbers


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June 4, 2013 8

Cash Flow statement (consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013E FY2014E FY2015EProfit before tax 138 156 136 55 89 124Depreciation 18 21 23 36 37 41(Inc)/Dec in Working Capital (86) (110) (198) (220) 4 (70)

Less: Other income (6) (5) (8) (3) (9) (9)

Direct taxes paid (53) (56) (43) (17) (29) (40)

Cash Flow from Operations 10 6 (90) (149) 93 46(Inc.)/Dec.in Fixed Assets (58) (50) (211) (125) (57) (62)

(Inc.)/Dec. in Investments 0 0 (5) (31) 0 (5)

Other income 6 5 8 3 9 9

Cash Flow from Investing (52) (45) (208) (153) (48) (58)Issue of Equity 0.1 0.0 0 25.0 0.0 0.0

Inc./(Dec.) in loans 56 80 273 341 (30) 3

Dividend Paid (Incl. Tax) (10) (14) (10) (24) (24) (24)

Others 10 (12) 21 (39) 21 4

Cash Flow from Financing 47 65 263 342 (54) (22)Inc./(Dec.) in Cash 15 13 (13) (0) 11 (30)

Opening Cash balances 39 54 67 54 54 65Closing Cash balances 54 67 54 54 65 35



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June 4, 2013 9

Key ratios

Y/E March FY2010 FY2011 FY2012 FY2013E FY2014E FY2015EValuation Ratio (x)P/E (on FDEPS) 2.6 2.2 2.4 5.7 3.7 2.6P/CEPS 2.2 1.8 1.9 3.0 2.3 1.8

P/BV 0.4 0.4 0.3 0.8 0.7 0.7

Dividend yield (%) 3.7 5.6 3.7 3.7 3.7 3.7

EV/Sales 0.3 0.3 0.3 0.3 0.3 0.3

EV/EBITDA 2.3 2.2 2.5 3.9 3.1 3.0

EV / Total Assets 0.6 0.6 0.6 0.6 0.6 0.6

OB/Sales 1.9 1.9 1.6 1.6 0.0 0.0

Per Share Data (`)EPS (Basic) 10.3 12.1 11.2 4.7 7.3 10.2

EPS (fully diluted) 10.3 12.1 11.2 4.7 7.3 10.2

Cash EPS 12.5 14.7 14.0 9.0 11.8 15.2

DPS 1.0 1.5 1.0 1.0 1.0 1.0

Book Value 59.8 70.1 80.3 34.2 35.9 38.8

DuPont Analysis(%)EBIT margin 9.9 10.3 10.2 7.8 8.6 8.7

Tax retention ratio (%) 61.3 63.9 68.4 68.5 67.5 67.5

Asset turnover (x) 2.8 2.7 2.4 2.1 2.2 2.3

RoIC (Pre-tax) 27.7 27.7 24.0 16.4 18.6 19.5

RoIC (Post-tax) 17.0 17.7 16.4 11.2 12.5 13.2

Cost of Debt (Post Tax) 14.3 14.9 19.1 16.6 15.5 14.9

Leverage (x) 0.6 0.7 0.8 1.1 1.2 1.1

Operating ROE 18.7 19.6 14.3 5.5 9.0 11.3

Returns (%)RoCE (Pre-tax) 26.1 26.3 24.8 16.5 17.5 18.5

Angel RoIC (Pre-tax) 27.8 27.8 26.1 18.7 21.0 22.1

RoE 18.6 19.5 16.2 6.1 8.8 11.4

Turnover ratios (x)Asset Turnover (Gross Block) (X) 9.8 9.1 8.8 7.8 7.1 6.8

Inventory / Sales (days) 34 36 36 35 31 30

Receivables (days) 135 149 181 209 210 208

Payables (days) 111 116 134 147 148 147WC cycle (ex-cash) (days) 101 104 119 125 115 110

Solvency ratios (x)Net debt to Equity 0.6 0.7 0.9 1.2 1.1 1.1

Net debt to EBITDA 1.4 1.4 1.8 3.1 2.4 2.3

Interest Coverage 2.6 2.6 1.9 1.3 1.4 1.6



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June 4, 2013 10

Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com

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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.

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Documents

Jyoti Structures 4Q FY 2013