Up 1,000% Since Pandemic, this Infra Stock Could be Breaking Out for a Big Election Rally

Years of experience has taught me that a market crash can happen at any time.

It can catch anyone off guard.

As the adage goes, bull markets are born in pessimism, they grow on scepticism, mature on optimism, and finally they die on euphoria.

I'm sure many of you may be worried about a market crash, given how quickly the Indian stocks are moving these days.

If you ask me, we haven't reached the euphoria stage yet.

With an NDA victory predicted by most experts, the market rally could continue...

In the absence of a serious correction which changes the market sentiment from positive to negative, stock prices may continue to rise.

Infra stocks with strong order books, in particular, may continue the momentum. With strong government capex, it's been raining orders for companies in the construction and infra ecosystem.

One such company that has seen a slew of order inflows and several positive factors align for it is civil construction company J Kumar Infra.

The stock popped up on the scanner we have for tracking the top momentum stocks.

On 31 May 2024, the stock price rallied over 12% and hit a record high of Rs 768.

If you chart the performance of the company since the pandemic lows, the stock price has grown over 10x!

In the past 5 days, the stock is already up 14%.

Let's find out the key factors driving the momentum in this smallcap stock.

Why J Kumar Infra Share Price is Rising

#1 Blockbuster Earnings - ALL-TIME HIGH Profit

The steep rally seen today could be attributed to stellar Q4 and FY24 earnings posted by J Kumar Infra.

During the quarter, the company reported all-time high quarterly profit and neared the Rs 1 bn mark.

The company's net profit for the quarter ended March 2024 came in at Rs 996.7 million, a growth of 35% year-on-year (YoY).

Strong project execution drove the company's revenue to a new high of Rs 14.3 bn, up 23% YoY.

EBITDA for the quarter was up 27.3% at Rs 2 bn compared to Rs 1.6 bn in the year ago period.

For the full year ended March 2024, the company reported an operating cash flow of Rs 3.4 billion (bn) as against Rs 1.8 bn last year.

In its earnings call, the company's management has guided for around Rs 60-80 bn new order intake in FY25 and maintain the overall order book of around Rs 200-220 bn.

#2 Strong Order Book

The other reason why shares of the company have seen a steep rise is owing to the strong order book that it has pending at its end... a strong order book indicates strong revenue visibility.

As of March 2024, the order book stood at Rs 210.1 bn.

Out of this, around 39% of the total order book is from the elevated corridors and flyovers, while 24% is from the roads and road tunnels.

Apart from that, the company has 15% of its order book towards the metro elevated projects, and around 12% from metro underground projects.

In March this year, the company bagged two big orders in the same month and added around Rs 27 bn worth of orders.

To point out two of the major orders it received in FY24, the Goregaon Mulund Link Road project was worth Rs 30.9 bn while the Chennai elevated corridor project is worth Rs 35.7 bn.

What Next?

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

It received strong urbanisation orders in the financial year 2024.

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

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.

Coming to its 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.

Financial Snapshot

Rs m, standalone	FY19	FY20	FY21	FY22	FY23
Net Sales	27,871	29,705	25,708	35,272	42,031
Growth (%)	36%	7%	-13%	37%	19%
Operating Profit	4,644	4,572	3,367	5,295	6,275
OPM (%)	17%	15%	13%	15%	15%
Net Profit	1,771	1,836	639	2,059	2,744
Net Margin (%)	6%	6%	2%	6%	7%
ROE (%)	11.2	10.5	3.4	10.4	12.4
ROCE (%)	16.3	13.6	7.8	15.5	17.6
Dividend (Rs)	2.3	1.3	1.0	3.0	3.5
Debt to Equity (x)	0.4	0.4	0.3	0.2	0.2

Source: Ace Equity

J Kumar Infraprojects has set ambitious targets for its future growth, aiming to achieve the status of a US$ 1 bn firm by 2027.

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

How J Kumar Infra Share Price has Performed Recently

On 31 May 2024, shares of J Kumar Infra hit a record high of Rs 768 per share!

In the past 1 month, the stock price has moved up by 12%.

In the past 1 year, the stock price has rallied 189%.

Here's a table comparing J Kumar with its peers -

Comparative Analysis

Company	J Kumar	H.G. Infra	ISGEC Heavy	KNR Constructions	Patel Engineering
ROE (%)	7.9	29.4	9.3	17.3	6.9
ROCE (%)	12.9	25.4	11.2	23.2	14.3
Latest EPS (Rs)	43.7	82.6	33.1	27.6	3.4
TTM PE (x)	15.2	18.3	29.8	10.9	17.4
TTM Price to book (x)	1.9	4.1	2.9	2.4	1.2
Dividend yield (%)	0.6	0.1	0.4	0.1	0.0
Industry PE	45.2
Industry PB	5.4

Source: Ace Equity, Equitymaster

To know more about the company, check out its detailed financial factsheet on our website.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...