J Kumar Infra Projects
Market Cap – 995 cr
Current Market Price – 131
P/E – 5.7
Book value per share – 199.4
ROCE – 14 %
ROE – 9.42 %
Dividend yield – 1.52 %
The company is sharing its profit with shareholders.
BUSINESS
The company is involved in construction activities. The Company designs and constructs roads, bridges, flyovers, subways, over bridges, skywalks and railway terminus/stations, among others.
It was incorporated in the year 1999, and went public in the year 2008 .
The company operates in the states of Maharashtra, Gujarat, Delhi, Rajasthan, & Uttar Pradesh. It derives more than 90 percent of its revenues from the state of Maharashtra.
Company has a track record of completed more than 80 projects, and a strong order book of more than 10,000 crore . It consists mostly of projects which are under execution.
This order book is growing at a fast space for the company. Looking at data for order book from Q2FY19 presentation for the company
| Quarter |
Order book ( in crore) |
| Q2FY15 |
3057.2 |
| Q2FY16 |
3676.1 |
| Q2FY17 |
8289 |
| Q2FY19 |
9276.8 |
The order book has more than trebled in the last 4 years.
The company primarily operates in the business segment of transportation – that is bridges, flyovers, metros, etc. The company has metro projects of Mumbai, Pune, Ahmedabad which constitute roughly 65 % of its order book.
The company also has a small bit of revenues from the civil segment.
The financial performance of the company has also been very nice as reflected in the numbers.
( source -screener.in)
The OPM margins of the company has been in the range of 15- 19 %, better than the industry margins.
10 year sales CAGR – 25.34 %
5 year sales CAGR – 15.43 %
3 year sales CAGR- 15.15 %
10 year profit CAGR – 21.48%
5 year profit CAGR – 12. 5 %
3 year CAGR – 13.08 %
The company is registering good and consistent growth in sales and profits.
The management guides of being able to achieve similar growth in the future also based on the order book.
The company has a D/E ratio of 0.4 which is better compared to other peers in the same sector.
ROCE = 14 %
ROE = 9.42 %
The return ratios of the company has steadily declined over the years. This has primarily been due to increase in the working capital of the company. The receivable days have increased over the years, causing a longer cash conversion cycle. However the management in concalls indicate that the receivable days will show an improvement in the future. This needs to be closely tracked.
MANAGEMENT
- Jagdish Kumar Gupta is the founder promoter and the Executive Chairman. ( Age- 71)
Under his leadership, since its modest start in the year 1980, JKIL has expanded and grown as a Registered Class I-A construction company
- Mr Kamal Gupta – MD ( son of Mr. Jagdish Kumar Gupta)
He is a civil engineer , has been associated with the company since 1997 .
- Nalin Gupta – MD (son of Mr. Jagdish Kumar Gupta)
Graduated with a degree in B. Com and Member of Indian Institution of Bridge Engineer Associated with JKIL since 1997 and carries with him an experience of over 21 years.
Below is the table showing the management salaries with respect to the total PAT of the company over the years. The management seems to be taking modest salaries.
|
2014 |
2015 |
2016 |
2017 |
2018 |
| PAT ( cr) |
84 |
94 |
98 |
107 |
137 |
| Jagdish Kumar Gupta |
1.2 |
1.2 |
1.2 |
1.2 |
3 |
| As % of PAT |
1.43% |
1.28% |
1.22% |
1.12% |
2.19% |
| Kamal J Gupta |
0.9 |
0.9 |
0.9 |
0.9 |
1.5 |
| As % of PAT |
1.07% |
0.96% |
0.92% |
0.84% |
1.09% |
| Nalin J Gupta |
0.9 |
0.9 |
0.9 |
0.9 |
1.5 |
| As % of PAT |
1.07% |
0.96% |
0.92% |
0.84% |
1.09% |
|
|
|
|
|
|
| Total Salary ( cr) |
3 |
3 |
3 |
3 |
6 |
| As % of PAT |
3.57% |
3.19% |
3.06% |
2.80% |
4.38% |
|
|
|
|
|
|
With both sons of Mr. Jagdish Kumar Gupta in the business since 21 years we don’t have to worry about the succession plans.
The management conducts concalls every quarter , which I believe is a positive. The management has also been delivering the performance at they indicate in the concalls.
VALUATION
The company is available at at P/E of 5.7 and P/B of 0.7.
Hence the valuation is on the lower side for the company.
Looking at the past valuations of the company this has been one of the lowest valuations for the company.
RISKS
The company derives majority of the revenues from the state of Mahrashtra. Hence a slowdown in the infra spending in Maharashtra can be bad for the company.
Majority of the revenues of the company are from the transportation sector, hence the concentration risk is there.
The company has an ongoing SEBI case. It is under investigation by the SEBI. In 2008 the company had taken a contract for PACL ( at that time PACL was not a shell company) and subcontracted it to another company . The management indicates that SEBI has clarified during its meetings that it is not looking at Jkumar Infra as a shell company. SEBI only needs to clarify the transactions as per the management. They further indicate that the whole transaction was done in cheque and the amount was only 4 cr was earned as profit on this transaction. They have already paid 1 cr as tax on this profit earned as well.
So, the management overall believes that this SEBI issue is a very very small matter and its only a matter of time before it will get resolved. This issue is one of the reason for the stock price of this stock getting hampered.
CONCLUSION
J kumar infra has a strong order book , strong track record of execution , stronger margins than peers, and a robust balance sheet. The reason we are getting this company at cheaper valuations is the general perception towards infra companies , the SEBI issue, etc. If the SEBI issue clears up , there can be potential upside in this stock.
DISCLOSURE
I am personally invested in this stock. This is not an investment advice. I am not a SEBI registered Investment Advisor.
shikharmundra 