Ace Investor Dolly Khanna Adds Stake in Multibagger Smallcap Stock

One of the earliest and most important lessons that successful investors learn is the value of looking beyond the headlines.

While popular stocks may grab average investors' attention, often these tickers can be siren songs, luring many into unwise investments and distracting them from proven winners.

To find the compelling stocks that others are missing, many people look to portfolios of seasoned investors.

These investing gurus ace the market test and earn high returns.

For investors seeking such news, there is noteworthy stock market news: Dolly Khanna, an ace investor recently added an infra stock to her portfolio.

Who is Dolly Khanna?

Dolly Khanna is a Chennai-based investor who is known for picking lesser-known midcaps and smallcaps. She has been investing in stocks since 1996.

Dolly Khanna's portfolio, managed by her husband, Rajiv Khanna, is usually inclined towards more conventional stocks in manufacturing, textile, chemical, and sugar stocks.

Why did Dolly Khanna Buy this Infrastructure Stock?

The stock in question is J Kumar Infraprojects.

The company is engaged in the execution of contracts for various infrastructure projects, including transportation engineering, irrigation projects, civil construction, and piling work.

The latest shareholding pattern of J Kumar Infra shows that Dolly Khanna has added a 1% stake in the company, respectively, as of the December 2023 quarter.

Notably, in the September 2023 quarter, her name was missing from the list of shareholders.

Before this, in the September 2022 quarter, she held about 1.1% stake or 0.8 million (m) shares.

This means perhaps she had a partial stake already and has now decided to double down, or she could have bought the entire stake in the quarter gone by.

Dolly Khanna's stake is valued at Rs 450 million (m), with 758,303 shares.

While we don't know why she added shares of J Kumar Infra, there are some reasons that we can guess.

#1 Climate Resistant Urban Infra Beneficiary

J Kumar Infra is an urbanisation capex play, which is benefitting from climate-resistant infrastructure.

J Kumar Infra has seen strong urbanisation orders in the financial year 2024 so far, with its order backlog going up by 114% from last year.

The company is currently witnessing a surge in urbanisation orders, amounting to Rs 88 billion (bn) in the current financial year.

This uptick is attributed to the government expediting orders in anticipation of a potential lull associated with upcoming elections.

Notably, 57% of the orders secured in the second half of FY24 are attributed to significant projects, including a large tunnel in Mumbai, Mumbai Metro Line 2 stations, and the elevated corridor in Chennai.

The second quarter of FY24 saw a remarkable 16-fold year-on-year growth in order inflow for J Kumar Infra, driven by the acquisition of multiple large orders. Additionally, the company's backlog increased by 44% year-on-year, underscoring its strong market position and growth trajectory.

Further, the government's focus on decarbonisation and climate-resistant infrastructure as part of city decongestion capital expenditure is signalling promising prospects for the company in securing large orders amid India's pursuit of modern, climate-resistant infrastructure.

The significant growth and promising outlook for substantial order wins explain Dolly Khanna's decision to invest in the company.

#2 Back-To-Back Order Wins

J Kumar Infra, on 16 December 2023, bagged an order to construct the 3.2 km elevated corridor from Teynampet to Saidapet.

This substantial order, valued at Rs 5.8 bn, was awarded by the Tamil Nadu government for the development of a four-lane elevated corridor on the Grand Southern Trunk Road.

The project will follow an engineering, procurement, and construction (EPC) approach and is slated to be completed within 24 months.

Adding to their recent success, J Kumar Infra in December secured another construction order last month, amounting to Rs 3.8 billion. This project involves the construction of a flyover and is scheduled for completion within 30 months.

In October, the company received a letter of acceptance for a Rs 5.1 billion project. In this venture, J Kumar Infra will providing technical accommodation and allied infrastructure for the Command Hospital in Lucknow.

The project will be executed in an EPC mode, with an estimated duration of 90 months - comprising 30 months for construction and 60 months for maintenance.

Additionally, in October, the company secured another order from the Mumbai Metropolitan Region Development Authority (MMRDA). Furthermore, in September, J Kumar Infra's joint venture with NCC secured a substantial order worth Rs 63 bn.

The consecutive and sizable wins, totalling five within just four months, underscore J Kumar Infra's strong project acquisition capabilities. This remarkable achievement could be one of the key reasons why a seasoned investor like Dolly Khanna opted to include this stock in her portfolio.

What Next?

J Kumar Infraprojects has set ambitious targets for its future growth, aiming to achieve the status of a US$ 1 bn firm by 2027. This vision aligns with the escalating government focus on the infrastructure sector, as outlined on the company's portal.

The company has recently increased its order book guidance by Rs 30 bn, resulting in an elevated overall order book expectation for FY24, ranging between Rs 150 and Rs 160 bn.

Looking ahead to FY25, the management has adjusted its revenue growth projection to 16-17%, up from the previous 15%, anticipating a top line of Rs 48 bn in FY24. Additionally, the engineering firm aims to enhance its margin by 1% point over the next eight quarters, as stated in the earnings transcript.

J Kumar Infraprojects also showcases a robust bidding pipeline, with plans to bid for projects amounting to Rs 250-300 bn over the next 6-9 months.

Positioned to benefit from a robust capital expenditure cycle, the company is well-prepared to seize opportunities and contribute to its ongoing growth.

A look at the Financials

The company's revenue has grown steadily over the past three years, with a CAGR of 17.8%. This indicates a strong and expanding business.

Net profit has also increased over the period but at a faster pace of 62.5% than revenue. This is reflected in the increasing net profit margin, which rose from 2.5% in FY21 to 6.5% in FY23.

This can be attributed to a significant order wins due to increased economic activity.

Financial Snapshot (2021-23)

(Rs m, Consolidated)	FY21	FY22	FY23
Net sales	25,708.00	35,272.00	42,031.00
Sales growth (%)	-	37.2	19.1
Net profit	639	2,059.00	2,744.00
Net profit margin (%)	2.5	5.8	6.5

Source: Equitymaster

Further, the company's finances are also set to benefit from increasing government capex cycle.

How J Kumar Infraprojects Shares Have Performed Recently

In the past one year, shares of J Kumar Infraprojects have gained 110%. In the past five days, J Kumar Infraprojects is up 3%.

J Kumar Infraprojects has a 52-week high of Rs 635.7 touched on 27 December 2023 and a 52-week low of Rs 2278 touched on 2 March 2023.

It is currently trading at a PE (Price to Earnings) multiple of 15.4x, while PB (Price to Book) ratio stands at 1.8x.

About the company

J. Kumar Infraprojects operates in the construction industry.

The company is engaged in the execution of contracts of various infrastructure projects including transportation engineering, irrigation projects, civil construction, and piling work.

Its transportation engineering business includes roads, flyovers, bridges, monorail, metrorail, and skywalks. The company's irrigation projects are spread across Maharashtra, mainly in Vidarbha region.

The civil construction segment includes the construction of corporate offices, buildings, and transport terminals like airports and railways.

To know more about the company, check out J Kumar Infraprojects' financial fact sheet.

For a sector overview, read our engineering sector report.

You can also compare J Kumar with its peers:

J Kumar Infra vs GMR Infra

J Kumar Infra vs Ashoka Buildcon

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