The Hindu Business Line : Strong order book powers up Jyoti Structures

BETTER investment climate and a healthy order book infused some amount of optimism into the stock of Jyoti Structures Ltd (JSL) on the bourses recently.

According to market perception, significant investments in the power transmission and distribution sector would ensure sustained order flow for JSL.

Besides manufacturing transmission line towers and sub-station structures, the company also undertakes turnkey contracts.

According to Mr Dilip Bhat, Director (Research) at Prabhudas Liladher, there is a good amount of visibility for JSL over the next two years. "The company has good order flow and has got better price realisations on all new contracts. As such, they are looking at better margins. There will be a 50-55 per cent growth in topline for the fiscal 2005," he said.

Mr Bhat is of the view that for the current year ended March '04, the company is looking at earnings of about Rs 6-7. "However, for March '05 we are looking at an earning per share of Rs 20, i.e. after paying 27-30 per cent as tax," he said.

"Over the past two years, lack of investments in the sector had resulted in fierce undercutting from competitors, resulting in lower profitability across the industry. Better investment climate has ensured new orders to be booked at better rates which would translate to some improvement in the EBITDA (earnings before interest, taxes, depreciation and amortisation) margin in the financial year 2005," an analyst tracking the company said.

A Kotak Securities report maintains that strong order flows would result in a 35 per cent year-on-year rise in sales in fiscal '05. This, coupled with an improvement in margins and savings in interest costs, would translate into a much higher growth in net profit.

The stock ended the day at Rs 76.65, up 3.58 per cent, with around 3,693 shares traded on the BSE. On the NSE, it ended at Rs 77.80, up 4.08 per cent, with around 7,438 shares traded.