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Jyoti Structures: No disappointment here
Aug 5, 2008

Standalone results performance summary
  • Net sales grow by 35% YoY in 1QFY09 on the back of higher realisations and volumes.
  • Operating margins contract by 0.4% YoY on account of higher raw material costs (as percentage of sales).
  • Net profits grow by 28% YoY, though at a pace lower than the topline growth Ė impacted by contraction in operating performance and higher interest and tax expenses.


(Rs m) 1QFY08 1QFY09 Change
Net Sales 2,967 4,016 35.4%
Expenditure 2,599 3,536 36.0%
Operating profit (EBITDA) 367 480 30.8%
Operating profit margin (%) 12.4% 12.0%
Other income 1 4 327.6%
Depreciation 16 17 5.6%
Interest 95 134 40.0%
Profit before tax 256 333 29.9%
Tax 96 128 32.9%
Profit after tax/(loss) 160 205 28.2%
Net profit margin (%) 5.4% 5.1%
No. of shares (m) 81.2
Diluted earnings per share (Rs)* 9.5
P/E ratio (x)* 13.2

What has driven performance in 1QFY09?
  • Jyoti Structures (JSL) recorded a 35% YoY growth in its topline during 1QFY09. This was driven by higher volumes and realisations per tonne. Also, the fact that the company had gone in for capacity expansion in mid-2008 has benefited it. JSLís transmission line business contributed to about two-thirds of the topline while the other two segments, rural electrification and substations, contributed 14% and 20% respectively. Domestic revenues contributed to nearly 65% of total revenues while the balance was exports (33%) and deemed exports (2%). The company currently has an order backlog of Rs 36 bn (2.5 times its FY08 sales).

  • During 1QFY09, JSLís operating margins contracted by 0.4% YoY. The main reason for this was the rise in input costs, from 60% of sales in 1QFY08 to 65% in 1QFY09. The entire impact of this sharp rise in material costs was though not seen the companyís profitability. This is because JSL is protected by price variation clause in majority of its projects, and thus has the ability to pass on the rise in input prices to its customers.

    Cost details
    Rs m 1QFY08 1QFY09
    Item Amount % of sales Amount % of sales
    (Increase)/decrease in stock -11 -0.4% 39 1.0%
    Consumption of raw materials 1,774 59.8% 2,604 64.8%
    Employee costs 75 2.5% 103 2.6%
    Erection & sub-contracting charges 581 19.6% 502 12.5%
    Other expenditure 180 6.1% 288 7.2%
    Total 2,599 87.6% 3,536 88.0%

  • JSLís net profits grew by 28% YoY during 1QFY09. This growth was however lower than that clocked by the topline, largely on account of decline in operating margins and higher interest and tax expenses.

What to expect?
At the current price of Rs 125, the stock is trading at a multiple of 13.2 times its trailing twelve months earnings. Of the current order backlog, customer-wise, Power Grid Corporation of India (PGCIL) has a share of 40%, state electricity boards (SEBs) contribute 35%, 10% by private players and the balance are exports and deemed export orders. Considering the past financial conditions of SEBs, the fact that JSL has a relatively high exposure towards them, does bring a certain amount of caution to oneís mind. However, the companyís management has persistently been mentioning that they have seen a good improvement in their financial conditions of SEBs and that their conditions have significantly improved over the past few years.

The companyís management, in its conference call held recently, did mention that they have been seeing strong interest from private players, especially for their captive uses. The management further added that in the coming two months, they are expecting tenders worth Rs 40 bn to be announced, of which nearly 60% will be coming from international clients while the balance will be divided almost equally between transmission lines (PGCIL) and rural electrification projects. The company has planned a capex of Rs 600 m for FY09 mainly towards buying machinery and equipment for its domestic facilities.

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