This Small Cap Construction Stock Gave More Than 40% In 3 Months, Buy For 40% Gains: HDFC Securities

HDFC Securities suggests "buy" JMC Projects (India) Limited with a target price of Rs 172/share. According to the brokerage firm, investors buying stock with the given target price can expect to gain up to 40%. JMC Projects is a small-cap construction sector company with a market capitalisation of Rs 2,074.47 Crore.

Current Market Price, 52 High & low, Returns

The current market price (CMP) of JMC Projects on NSE stood at Rs 123.55 per share after gaining 5.82% compared to its previous close. Its 52 week high was recorded on 11 November 2022 at Rs 126.95 and its 52 week low was recorded on 11 May 2022 at Rs 68.10, respectively.

The stock over the past 5 years has given good returns. In a week, the stock surged 9.68%, 16.94% in 1 month and 40.72% in 3months, respectively. Over a year, the stock has given 16.89% positive returns. In 3 years it gave 9.29% positive returns. In 5 years, it gave 33.09% positive returns.

Financial highlights: Revenue

INR 18bn (+35.9/10.8% YoY/QoQ, a 1.1% miss), aided by strong execution in B&F, water, and international projects. EBITDA: INR 1.5bn (+73.2/+9.7% YoY/QoQ, a 1.3% miss). EBITDA margin: 8.3% (+180/-9bps YoY/QoQ, vs. our estimate of 8.4% estimate, led by higher execution, improved business mix and declined cost pressure). RPAT: INR 533mn (-2.3x/+4.7% YoY/QoQ). Exceptional Item: INR 10.4mn towards provision made for expected credit loss against further loans given to Kurukshetra Expressway Private Limited (KEPL), a Joint venture (49.6%) of the company. APAT: INR 541mn (+6.5x/+6.3% YoY/QoQ, a 9.3% miss). JMC has guided for FY23 revenue growth of 20-25% YoY, with EBITDA margin at around 9% (9-9.5% expected in Q4FY23).

 

Robust order inflows and OB

JMC received orders worth INR 23.8bn in Q2FY23, taking the OB (ex. L1 orders of INR 17bn) to INR 200bn (~3.7x FY22 revenue). Of the total OB, water/B&F/urban infra constitute 42/43/15%. FY23TD OI stands at INR 75bn (~68% of FY23 OI guidance of INR 100-110bn); domestic/international at 87/13%.

Balance sheet cleaning awaited

Standalone gross/net debt increased to INR 11.2/8bn as of Sep'22 vs. INR 8.8/5.7bn as of Jun'22. The total JMC investment in BOOT asset at the end of the quarter is INR 6.5bn, with INR 210mn invested in Q2FY23. On Wainganga Expressway restructuring, the closure is now expected by end of Q4FY23. The ADTC from road BOOT assets in Q2FY23 came in at INR 5mn (+13% YoY).

Slowing inflation to drive margin upside, Buy for Rs 172 target price

JMC Projects (JMC) reported revenue/EBITDA/APAT of INR 18/1.5/0.5bn, missing our estimates by 1.1/1.3/9.3%. The EBITDA margin at 8.3% expanded 180bps YoY, due to higher execution, improved business mix and declined cost pressure. The average daily toll collection (ADTC) from road BOOT assets in Q2FY23 came in at INR 5mn (+13% YoY), owing to increase in traffic. However, the loss funding requirement for the portfolio is INR 700-800mn for FY23 (incl. INR 250-300mn of major maintenance requirement). On Wainganga Expressway restructuring, the closure is now expected by the end of Q4FY23. The order inflow (OI) in Q2FY23 was at INR 23.8bn, taking the order book (OB) to INR 200bn (~3.7x FY22 revenue). Standalone gross/net debt increased to INR 11.2/8bn as of Sep'22 vs. INR 8.8/5.7bn as of Jun'22. "As we roll forward to Sep24E earnings, we maintain a BUY rating on the stock, with an increased target price of INR 172/sh," the brokerage said.

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.