Professional Documents
Culture Documents
BUY
Recommendation (Rs.)
CMP
60
Upside (%)
26
irrigation business, there are not many financing options available for farming
activities. JISL has floated Sustainable Agro Commercial Finance Ltd (SAFL),
a NBFC which provides finance to farmers. This could able to ease its stretched
balance sheet and reduce the working capital cycle.
Margins likely to expand: Polymers are the raw materials for piping as well as
irrigation business; and are the derivatives of crude oil. Softening crude oil prices
could decline the raw material costs. With a presumption of lower crude oil prices,
the margins could expand during the coming years.
Target Price
75
Stock Information
Mkt Cap (Rs.mn/US$ mn)
26169 / 396
4.3
Sensex/Nifty
93 / 51
1.5
25823 / 7846
O/S Shares(mn)
443.1
2.0
28.7
augurs well for the company towards needs of the customers and expansion of the
DIIs
11.7
4000 with farming background and are influential in their respective regions
FIIs
business.
Others
31.9
27.8
Absolute
Relative to Sensex
1M
3M
6M
12M
(6)
(14)
(2)
(32)
(0)
(8)
(30)
Source: Bloomberg
costs to drive PAT growth. However, debt reduction remains a key monitorable. We
initiate BUY with a target price of Rs.75, based on 15x FY17E EPS. At current
levels, the stock is trading at 16.8x FY16E EPS and 11.8x FY17E EPS.
Relative Performance*
200
150
100
Key Risks
50
0
yyWithdrawal of subsidies.
Jul-12
Jul-13
Sensex
Jul-14
Jul-15
JISL
FY13
FY14
FY15
FY16E
FY17E
50217
58281
61579
66669
71145
14.4
13.2
12.8
13.2
13.7
7253
31
(398)
0.1
(1.8)
EPS (Rs.)
0.1
PE (x)
NA
RoE (%)
7700
(0.9)
NA
7875
8829
9772
553
1645
2333
2.6
7.1
9.3
1.2
NA
3.6
16.8
5.0
11.8
For private circulation only. For important information about Karvys rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Analyst Contact
Joyjit Sinha
joyjit.sinha@karvy.com
Company Background
FY16E
FY17E
Net sales
61579
66669
71145
EBITDA
7875
8829
9772
53704
Depreciation
57840
2441
Interest
2541
4692
Other Income
4394
331
PBT
451
1073
Tax
2345
61373
2691
4232
478
3327
(239)
(703)
(998)
12.8
13.2
13.7
P/E (x)
NA
16.8
11.8
0.8
0.8
0.8
Adj. PAT
553
1645
2333
0.9
EV/EBITDA (x)
2.5
5.3
4.7
3.3
4.1
FY16E
FY17E
Total Assets
83799
85768
88007
Current assets
49289
52450
54853
Interest (net)
24531
Other assets
25036
8933
7159
25195
6751
Total Liabilities
83799
85767
88006
Debt
16957
16275
15675
Networth
21399
Current Liabilities
23199
43783
Other Liabilities
44838
1660
1455
25079
45766
1486
2.6
RoCE (%)
Net Debt/Equity
7.1
15.0
17.1
18.5
0.3
0.3
0.3
1.8
Equity/Total Assets
P/BV (x)
1.7
1.3
1.2
Others
27.8%
9.3
1.5
1.1
FY16E
FY17E
310
2345
3327
4692
4394
4232
Depreciation
2441
Tax
(271)
Changes in WC
Others
CF from Operations
2541
(561)
2691
(859)
(868)
(2380)
(1381)
6613
6825
8307
307
486
296
Capex
(2205)
(1643)
(3000)
CF from Investing
(2288)
(1454)
(2811)
(270)
(270)
(270)
Others
(83)
Change in Debt
1656
Dividends
Interest paid
(4640)
CF from Financing
(3254)
Change in Cash
1070
189
(982)
(4394)
(5646)
(275)
189
(900)
(4232)
(5402)
93
Promoters
28.7%
Industrial
Products
35.6%
DIIs
11.7%
Green Energy
2.1%
Hi-tech
agri input
products
62.3%
FIIs
31.9%
Source: Company, Karvy Research
FY15
World Micro Irrigation and sprinkler irrigation could be new opportunities for global expansion:
The World Micro Irrigation (MI) market is one of the fastest growing segments of global agricultural industry. Increase in crop
production, protection against drought-like situation are the major drivers of the MI market. Where there is scarcity and costly
labour, large areas need to be irrigated with minimum waste of time and water, MI systems come into play. The global market
players like JISL to be benefited from responding to these new opportunities by expanding their global presence and product
lines.
Government subsidies and reforms like Pradhan Mantri Krishi Sinchai Yojana (PMKSY) likely to contribute
towards JISLs growth:
The Governments (Central and State) provide upto 50% of capital subsidy for promoting the use of Micro Irrigation by farmers.
This can be said that the Government is encouraging for adoption of MI system as regular practice for future safety due to water
scarcity, in order to conserve natural water resources.
Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, has given approval to a new scheme named
Pradhan Mantri Krishi Sinchayee Yojana (PMKSY). It will have an outlay of Rs.500 Bn over a period of 5 years (FY16 to
FY20) and the allocation during the current financial year is Rs. 53 Bn. One of the major objectives of PMKSY is to improve
on-farm water use efficiency to reduce wastage of water, enhance the adoption of precision-irrigation and other water saving
technologies (more crop per drop). Being a leading manufacturer and supplier of irrigation systems, PVC & Polyethylene pipes,
there could be every chance that JISL could be benefited from such scheme of Indian government.
GoIs focus on agriculture, sanitation and infrastructure segments augurs well for its Polyethylene Pipes (PE
Pipes), Fittings PVC pipes and fittings business:
Piping industry for next decade expected to grow at 15% CAGR which is mainly because of demand in agriculture pipes,
plumbing pipes and industrial pipes. A robust demand is expected for Polyethylene Pipes (PE Pipes) fittings, PVC pipes fittings
from the irrigation and sanitation space in the coming years. Users are opting for PE pipes and PVC sheets due to its techno
commercial superiority. Governments massive drive towards improving infrastructure in the country has been giving positive
vibes to the PE Pipes segment of the market.
PE pipes used for making availability of water to the farmers replacing canals, PE pipe network used for gas transportation,
Irrigation-Sprinkler and drip segment and also transportation of drinking water segment as well. Concept of green building is
growing at rapid space to boost the products of PVC sheets like PVC doors and windows replacing wooden doors and windows.
Industrial
Products
21,944
Hi-tech
agri input
products
38,369
JISL offers its services & products to various segments like Hi-tech agri
input products, industrial products and green energy. We believe that the
company is well insulated from any economic slowdown as its multiple
businesses could maintain its top line growth even during slowdown in
other sectors. Its diversified business model not only acts as a profitability
driver but also insulates it from slowdown in any segment.
Geographical diversification of revenue to insulate from sales and operations in particular region
Exhibit 5:
North
America
9.8%
Rest of the
World
18.6%
India
54.9%
Europe
16.7%
JISL has production and processing facilities across India; sales growing
in various states of India and internationally, which makes its sales and
production less susceptible to weather or other risks in a particular region.
JISL is set to expand internationally and looking for opportunities for future
growth especially in agriculture markets. Its revenue is diversified across
wide range of products and customers. No single customer accounts for
more than 5% of its total revenue in FY14.
JISL positioning to capitalize on the growing opportunities in the world food processing Industry:
JISL is largest manufacturer of Mango pulp, puree and concentrate in the world, and the third largest manufacturer of dehydrated
onions the largest manufacturer of Tissue Culture banana plants in the world. India ranks first in the world in production of fruits
and second in vegetables, accounting roughly 10 and 15 percent, respectively, of total global production. Despite the large
production of fruits and vegetables, it is estimated that only approximately 6 per cent of total agro output of India is currently
processed as against up to 60-80 per cent in some developed countries. Indias share in the global food trade is only 1.5%. All
of this implies that there is a great potential to grow for this industry. An increase from 6% to 20% in terms of processing and
increase in value addition from 20% to 30% will translate into quantum jump in the size of the processed fruit and vegetable
industry. The National policy aims to increase the percentage of food being processed in the country to 25 percent by 2025.
It is proposed by the companys management that JISL Indian Food Business to carve out to form a wholly owned subsidiary
company named as Jain Farm Fresh Foods Limited (JFFFL). The carving out of Indian Food Business to JFFFL will also allow
creation of strategic focus and value creation opportunity as a consequence. This could enable the company to organize its
foods vertical under an independent and focused management and achieve benefits of scale. Management expected to achieve
15-20% growth in food business during FY16E.
FY14
FY15
FY16E
FY17E Comments
Consolidated
Revenue
58281
61579
66669
16.1
5.7
8.3
EBITDA
7700
7875
8829
13.2
12.8
13.2
EBIT
6117
5765
6739
7559
6.7
(398)
553
1645
EPS
(0.9)
1.2
3.6
5.0
-to +
194.0
41.8
(2205)
(1643)
(3000)
(3322)
Net CFO
Net Debt (LT + ST)
5731
6613
6825
36866
39358
38376
37476
2409
4408
5182
5307
Consensus
Divergence (%)
FY16E
66669
67273
(0.9)
FY17E
71145
76402
(6.9)
FY16E
8829
9099
(3.0)
FY17E
9772
10720
(8.8)
FY16E
3.6
4.2
(14.3)
FY17E
5.0
7.0
(27.7)
Comments
EPS (Rs.)
58281
50217
20000
49206
40000
2.1%
8.3% 6.7%
71145
60000
5.7%
66669
16.1%
61579
80000
20%
15%
10%
5%
FY17E
FY16E
FY15
FY14
FY13
0%
FY12
Industrial Products
FY12
FY13
FY14
FY15
33798
31656
36347
38369
1770
1266
13536
16252
20165
21.8
17.6
14.3
13.9
Non-conventional energy
20.1
17.1
15.3
10.4
Green Energy
1872
2309
21944
9.9
7.3
9.5
9.9
13.2%
8829
7875
7700
5000
16.6%
8155
10000
20%
15%
10%
5%
FY17E
FY16E
FY15
FY14
FY13
0%
FY12
EBITDA (Rs. Mn )
EBITDA Margins (%)
Source: Company, Karvy Research
PAT (Rs in Mn )
4
2
0
-2
FY17E
553
-0.7
FY14
-398
31
FY13
FY12
-500
0.1
FY15
0.9
500
3.3
1645
2.5
FY16E
1500
4.5
2235
2500
2333
We expect the net profit has recovered to Rs. 553 mn during FY15. We
expect the growth momentum to be maintained by the company on the
back of improving top line and decrease in raw material prices. We expect
PAT to register growth of 198% and 42% during FY16E and FY17E on YoY
basis.
Growth (%)
20%
17.3% 16.7%
12.7%
15%
15.0%
17.1%
7.1%
10%
9.3%
5%
0%
RoCE (%)
FY16E
FY14
-5%
FY13
FY12
0%
15%
10%
-1.8% 2.6%
0.1%
FY15
5%
18.5%
JISLs RoE (Return on Equity) is modest because of high finance cost. Its
RoCE has always been strong and we expect that it will be stable in the
coming years.
FY17E
25%
18768
111
111
21904
111
20505
118
18770
10000
154
21129
20000
168
22712
30000
150
100
50
Debtors are in line with the revenue but the collection period declined from
168 days in FY12 to 111 days in FY15.
FY17E
FY16E
FY15
FY14
FY13
0
FY12
200
3.0%
2.7%
3%
1.9%
2%
0.7%
FY17E
FY16E
FY13
-1%
FY12
0%
-0.5%
FY15
0.0%
FY14
1%
Return on Assets
Source: Company, Karvy Research
1.2
1.2
1.20
1.1
1.1
1.2
1.1
JISL maintained current ratio at more than 1x indicating that the company
is meeting the current liabilities using its current assets.
1.05
FY17E
FY16E
FY15
FY14
FY13
FY12
1.00
Current Ratio
Source: Company, Karvy Research
170
160
142
143
152
151
FY17E
180
FY16E
200
140
FY15
FY14
FY13
FY12
120
Cash conversion cycle has declined from 176 days in FY12 to 143 days
in FY15. We expect the company will maintain the same level of working
capital cycle in terms of number of days.
1.7
1.6
1.8
1.7
1.5
1.5
FY17E
FY16E
FY15
FY14
FY13
FY12
1.0
High
2
Quality of Earnings
Domestic Sales
Exports
Net Debt/Equity
Corporate Governance
Source: Company, Karvy Research
33
33
33
33
33
33
33
33
33
Nov-13
Jan-14
Mar-14
PE
May-14
Jul-14
5x
Sep-14
Nov-14
Jan-15
15x
Mar-15
May-15
30x
Jul-15
Sep-15
50x
3.0
2.5
150.0
2.0
100.0
1.5
1.0
50.0
0.5
0.0
0.0
Sep-12
Jan-13
1x
May-13
1.5x
Sep-13
Jan-14
2x
May-14
2.5x
Sep-14
Jan-15
3x
May-15
Sep-15
P/BV (RHS)
We expect the JISL to restructure its debt and debtors collection period to and restructure is balance sheet. Currently, the stock
is trading at 1.3x FY15 BV, 1.2x FY16E BV and 1.1x FY17E BV. We value the stock at 1.4x FY17E BV for a target price of Rs.75
per share representing an upside potential of 26% in 9-12 months.
Key Risks
yyWithdrawal of subsidies: Withdrawal of subsidies for micro irrigation systems by Central and State Governments is a key
risk which could lead to JISLs de-growth.
yyExposed to foreign currency fluctuations: More than 45% of the revenue is from abroad. Volatility in currency may impact
export revenues as well as margins.
Financials
Exhibit 21: Income Statement
YE Mar (Rs. Mn)
FY13
FY14
FY15
FY16E
FY17E
Revenues
50217
58281
61579
66669
71145
Operating Expenses
42964
50582
53704
57840
61373
Growth (%)
(11.1)
6.2
2.3
12.1
10.7
Growth (%)
EBITDA
2.1
7253
16.1
7700
5.7
7875
8.3
8829
6.7
9772
1696
2045
2441
2541
2691
6226
6117
5765
6739
7559
125
(860)
310
2345
3327
31
(398)
Other Income
EBIT
Interest Expenses
668
4855
(80)
463
4676
331
4692
451
4394
478
4232
462
(239)
(703)
(998)
+ to -
- to +
197.5
41.8
FY13
FY14
FY15
FY16E
FY17E
2359
1968
3044
2770
2863
(98.6)
553
1645
2333
Sundry Debtors
Inventory
Miscellaneous
19547
17994
19541
21469
22339
5808
8818
7582
6926
6769
17231
38
18364
14
18566
621
19071
621
20148
621
24327
25579
25051
25036
25195
8150
8500
8868
8752
8864
749
807
526
1122
1208
Total Assets
78208
82044
83799
85768
88007
34170
36866
39358
38377
37477
Total Liabilities
Shareholders Equity
Reserves & Surplus
20393
1966
56528
1072
20608
21565
1654
60084
925
20831
21382
1660
62400
925
20474
22737
1455
62569
925
22274
23965
1486
62928
925
24154
Total Networth
21680
21755
21399
23199
25079
78208
82044
83799
85768
88007
Minority Interest
205
10
FY13
FY14
FY15
FY16E
FY17E
PBT
125
(860)
310
2345
3327
4855
4676
Depreciation
1696
Tax Paid
(295)
Interest
Changes in WC
2045
2441
(41)
(271)
(3127)
(1551)
4275
5731
1021
1461
4693
2541
4394
(561)
2691
4232
(859)
(868)
(2380)
(1381)
6613
6825
8307
307
486
296
(3000)
(3322)
(2205)
(1643)
(3000)
(773)
410
(73)
189
189
356
(1)
(10)
(3418)
(2913)
(2288)
(1454)
(2811)
3903
(586)
(469)
1216
(265)
1656
(270)
(982)
(270)
(900)
(270)
Interest paid
(4843)
(4638)
(4640)
(4394)
(4232)
(1832)
(3202)
(3254)
(5646)
(5402)
Others
162
(974)
485
(384)
1070
(275)
93
FY13
FY14
FY15
FY16E
FY17E
14.4
13.2
12.8
13.2
13.7
2.5
3.3
RoCE (%)
12.4
0.1
10.5
(0.7)
714.3
(57.5)
0.1
(1.8)
1.6
0.9
41.3
1.8
2.6
10.1
14.1
1.7
7.1
10.6
9.9
1.5
9.3
16.7
15.0
17.1
18.5
FY13
FY14
FY15
FY16E
FY17E
0.1
(0.9)
1.2
3.6
5.0
BV (Rs.)
47.7
47.0
46.3
50.2
54.2
P/BV (x)
1.3
1.4
1.3
1.2
1.1
17.3
1.7
9.4
DPS (Rs.)
PE (x)
EV/EBITDA (x)
EV/Sales (x)
0.5
NA
5.5
0.8
0.5
NA
5.6
0.7
0.5
NA
0.5
16.8
5.3
0.7
Source: Company, Karvy Research; *Represents multiples for FY13, FY14 & FY15 are based on historic market price
4.7
0.6
0.5
11.8
4.1
0.6
11
Sell
Hold
Absolute Returns
> 15%
5-15%
<5%
research@karvy.com
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