We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.

INVESTING RATIONALE

• Better than industry EBITDA margins: The company does not subcontract any work, thus saving on overheads and completing projects on time and has a strong foothold in the EPC space. J Kumar Infraprojects Ltd owns a large fleet of construction equipment and machinery including 5 Tunnel Boring Machines and 42 hydraulic piling rigs, thus has better than industry EBITDA margins (16-18%).

• Strong revenue guidance: JKIL has not added any fresh orders in 1HFY18. However, it intends to maintain its order book in the range of Rs. 9000-10,000 cr in coming years. Range of order inflow would be of the order of ~Rs 2,000 Cr every year. JKIL has given a revenue guidance of Rs 1800 Cr for FY18E and Rs 2300 Cr for FY19E, with EBITDA margins of ~17% and PAT margins of ~7%.

• Robust order book provides revenue visibility: Current order book stands at Rs 8660 Cr which is ~6x of FY17 revenues. This would be executed over next 3-4 years. Order book break up. 55% Metro Underground, 17% Metro Elevated, 13% Roads, 12% Flyovers, 2% Civil, 1% Irrigation. Underground projects have better margins than elevated projects. 95% of the projects are Maharashtra based.

• Pure play urban infra company with focus on metros: Mumbai Metro envisages a network spaning ~200km, out which Line 1 is operational (11kms) and 68kms are under construction. Remaining is under planning or bidding process. With revenue recognition from Metro Lines 2A, 3, 7, it looks forward to participate in upcoming projects of Metro lines 2B, 4, 6 etc

• We maintain a BUY with a target of Rs.281.