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CD Equisearch
J Kumar Infra (Buy)
CMP: ₹225
Target: ₹321
Buttressed by stable order inflows so far this fiscal, J Kumar Infraprojects (JKIL) is eying projects over ₹4,500 crore ($652.8 million) for the next couple of years, including metro rail orders of Pune, Mumbai Delhi and Bengaluru. It recently bagged order for construction of underground shafts and R&R facilities for Pune Metro Rail worth some ₹222 crore.
Timely execution of landmark projects such as Metrol Line 2 and Line 3 hold sway to revenue recognition over the next two years. Some extension of these projects has started to become palpable.
Setbacks in misses of landmark order bidding and delays in order execution — extension in several projects often factors beyond contractors control such as environmental clearances and evacuation — need assaying. Yet no diminishing opportunities in Indian infrastructure sector — be it metro rail or NHAI road projects or housing & building projects — proves not unworthy of scrutiny. Weighing odds, we recommend buying the stock with revised target of ₹321 (previous target: ₹273) based on 13x FY20e earnings (forward peg: 0.7) over a period of 9-12 months.
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