Buy J Kumar Infraprojects; target of Rs 372: Edelweiss capital

J Kumar Infraprojects’ (JKIL) Q1FY17 revenue, at INR 4bn, spurted 11% YoY with
work picking up in flyover projects in the Mumbai region. EBITDA margin stood
at 16.9% YoY (down 164bps YoY). With capital costs remaining in control, PAT
rose 16% YoY to INR 295mn. The company has formally received the much-delayed
Mumbai Metro Line 3 (INR 50bn) and Line 7 (INR 3.6bn) projects, while agreement
signing for Line 2A project (INR 13.5bn) is expected shortly. Ground work on
all the 3 metro projects has already started. Delays in award of the metro
projects and our conservative stance on execution ramp up results in 4%/7% cut
in FY17/18E earnings. However, we believe JKIL remains one of the best bets in
the EPC space owing to strong revenue visibility (book-to-bill at 7x), healthy
balance sheet (net debt:equity at 0.1x) and attractive valuations
(trading at 6.5x FY18E P/E). Maintain 'BUY' with revised target price
of INR 372 (INR 400 earlier).