Buy JMC Projects; target of Rs 176: HDFC Securities

During 1QFY20 JMC reported Rs 9bn of Revenue (20% beat, 31.2% YoY growth). EBIDTA margins expanded 81bps YoY to 11.1%, resulting in an APAT of Rs 356mn (17% beat), despite increased depreciation and interest cost this quarter. With Rs 11.3bn of new order inflows during 1QFY20, the order book now stands at Rs 101.7bn. JMC has guided for ~Rs 60bn inflows in FY20E (majorly during 2HFY20). BOT assets reported a 5.2% YoY revenue growth in 1QFY20 (excluding overloading). Average toll collection stood at Rs 5.9mn/day in 1QFY20 (+7.3% YoY). JMC invested Rs 140mn as loss funding during 1QFY20 in BOT assets (Rs 384/410/650mn in FY18/FY19/FY20E). Total equity exposure now stands at Rs 7.5bn. We remain cautious on loss funding. Improvement in performance of BOT assets, to levels sufficient to satisfy its debt obligations, is not expected in the near future. Thus continued exposure to these assets without refinancing or asset monetization would entail a loss funding of ~Rs 700mn in FY21E. MP irrigation order continues to function smoothly. JMC recorded revenue of Rs 700mn during 1QFY20. There were initial issues in receipts of payments from the authority which have been subsequently resolved. Higher proportion of EPC revenue booking in this project is expected during 2HFY20.

Outlook

We maintain BUY on JMC, with a TP of Rs 176/sh (vs Rs 173/sh earlier). During 1QFY20 JMC delivered Rev/EBIDTA/APAT beat of 20/27/18% vs our estimates. We value EPC business at 16x Mar-21 EPS.

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