>JMC PROJECTS LIMITED (KR CHOKSEY)

INVESTMENT RATIONALE

JMC projects focuses on major construction segment with active presence in Industrial construction and infrastructure projects. JMC has strong expertise in urban infrastructure segment with ~55% of its order book comprising of Industrial and urban infrastructure construction projects. It has a long history of successful project execution in this domain. There is strong growth opportunity for companies engaged in power generation, transmission and distribution. JMC has strong presence in rural and urban water supply segments with ~30% of its order book concentrated on the infrastructure segment, comprising mainly of roads. With the kind of opportunity available in this segment, going forward, the company is expected to maintain its strong order position in this segment.

Key Developments
The company has recommended a dividend of Rs2 per share(20%) and company also plans to raise Rs 40 crore through issue of equity shares on rights basis. Company’s order book stands at at Rs.2,200 crore (1.7x its FY09 sales and 1.5x FY10E sales) of which ~58% consists of Industrial Construction and Buildings segment, Infrastructure projects ~30% and power ~12%. Management has given order book guidance of -2800-3000 crore by FY10 end.

Valuations
We believe JMC Projects is a good turnaround story and continues to improve its performance as observed from its FY08 and FY09 performance. We believe company will continue to grow at current levels and we expect the margins to settle down at current levels. At the CMP of Rs163 company is trading at 8.4x its TTM EPS of Rs19.3 and 7.0x its FY10E EPS of Rs.23.4. We believe the company is trading at discount to peers and therefore recommend a “BUY” on the stock with a target price of Rs.212 with an upside potential of 30%

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