JISL reported 4QF10 results with revenue, EDITDA, and adjusted PAT growing at 37%, 28% and 150%, respectively. Revenue growth was driven by 46% and 74% growth in the MIS – Micro Irrigation and Fruit processing businesses, respectively. EDITDA margins contracted by 160 bps, primarily because of a sharp dip in the profitability of agro processing business.
Micro irrigation grew 46% yoy despite flat performance in Andhra Pradesh. Margins were stable at 32.3% vs last year. The company guided for a segmental growth of 40% to 50% in FY11 and expects Andhra Pradesh to grow in FY11. We project 47% yoy micro irrigation growth in FY11 led by new entry states.
While fruit processing revenue grew 83% yoy led mainly by strong demand from coke (175% yoy growth); onion dehydration grew 42% as the demand came back post a lull in H1FY10.
JISL has outperformed the market by 20% over the past three months, primarily on news that the government has doubled the micro irrigation (MIS) subsidy outlay for F2011. While this endorses our view that government will continue to support the MIS business in India, it does not necessarily mean a stronger growth trajectory.
EPS Estimates for Jain Irrigation for FY 11 and FY 12 with Stock Target:
Morgan Stanley 47 and 60 with a target of RS 700
Bofa Merrill 50 and 70 with target of 1100
Edelweiss 46 and 58 with target of 1050
Consensus EPS 43 and 57