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Jai Hind Projects, Initiating Coverage

November 1, 2007

SBI Cap Securities has initiated coverage on Jai Hind Projects Ltd [JPL]. JPL operates as an engineering, procurement and construction (EPC) company. The company is involved in the construction and laying of onshore and horizontal directional drilling (HDD) pipelines, urban infrastructure development projects like construction of water systems, gas distribution projects and other environmental projects, corrosion protection services and engineering & turnkey projects.

JPL has an order backlog worth Rs.2142.4 mn as on FY07, which is 179.4% higher than FY06. Average ticket size has improved to Rs.235 mn, from Rs.125 mn in FY06. In order to support big ticket size projects, JPL has planned capital expenditure of Rs.400 million in span of two years. JPL is planning to enter into global EPC contracts for which it has tied up with Thiess of Australia, Naftogaz of Ukraine.

Valuations and Target for JPLThe company is likely to report a growth in revenue of CAGR of 73% over the next two years. The margin is expected to improve by 21 basis points (bps) in FY08E and 50 bps in FY09E,. At the
CMP of Rs.147, JPL trades at a P/E of 14.28x and 9.34x its FY08E and FY09E EPS of Rs.10.31 and Rs.15.77, respectively. On an EV/EBITDA basis the stock trades at 6.53x and 4.59x, our FY08E and FY09E earnings, respectively. Buy the stock with a 12 months price target of Rs.237 based on P/Eof 15X FY09E valuations.

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