11 August 2015
1QFY16 Results Update | Sector: Agri
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val,INRm/Vol ‘000
Free float (%)
Financials & Valuation (INR b)
EPS Gr .(%)
2015 2016E 2017E
TP: INR84 (+20%)
Results below estimates; food processing stake sale set to unlock value
Results below estimates, led by subdued food processing and MIS growth:
reported overall revenue of INR15.8b (est. of INR17.1b) as against INR15.5b in
1QFY15, marking a 2.2% YoY growth. The growth was led by piping business
(21.9% YoY); MIS business grew 5.1% and food processing de-grew 3.1%.
Domestic MIS business grew 9.6% during the quarter; however, overall MIS
business grew by only 5.1% on account of a 38% decline in MIS exports.
Margins expand on the back of lower polymer prices:
EBITDA stood at INR2.2b
(est. of INR2.2b) in 1QFY16, with EBITDA margins at 13.7% (est. of 12.9%), an
expansion of 80bp—primarily led by gross margin expansion of 160bp YoY.
Polymer prices, which are inputs for piping and MIS businesses, declined ~5%
QoQ—driving gross margin higher. During the quarter, forex loss stood at
INR247m due to a 2% depreciation in USD:INR. Consequently, adj. PAT for the
quarter stood at INR390m (est. of INR418m) as against INR203m in 1QFY15.
Stake sale in food processing set to unlock vale:
The management highlighted
that the process for subsidiarization and 25% stake sale of food processing
business is on track, with transaction finalization likely by October 2015. We
believe 25% stake sale in food processing will unlock value for Jain Irrigation and
will set a valuation benchmark for the food processing business, along with paring
debt at the parent level; this is expected to be a near-term trigger for the stock.
Valuation and view:
The management is confident of double-digit revenue
growth in FY16, lead by 15% growth in MIS, 20% in food processing and 20% in
Piping; however, the first-half is expected to be muted (with growth likely to be
back-ended). Additionally, the management is confident of INR3b of debt
retirement in FY16. We cut our EBITDA estimates by 3%/7% for FY16/FY17. Due
to high financial leverage, our EPS estimates for FY16 and FY17 are lower by 13%
and 16%, respectively. Maintain
with a TP of INR84 (12x FY17E EPS).
(Atul.Mehra@MotilalOswal.com); +91 22 3982 5417
(Niket.Shah@MotilalOswal.com); +91 22 3982 5426
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