1. 4QFY2010 Result Update I Agri-Business
May 12, 2010
Jain Irrigation Systems ACCUMULATE
CMP Rs949
Performance Highlights Target Price Rs1,062
Jain Irrigation Systems (JISL)’s 4QFY2010 sales growth of 37% yoy and Investment Period 12 Months
Adj. PAT growth of 40% yoy was ahead of our estimates. The EBITDA Margin
came in a tad bit lower at 20.7%, as against 22.5% in 4QFY2009. Higher Stock Info
costs in the onion Segment resulted in the lower EBITDA Margin. The
Sector Agri-Business
company’s current order book stands at Rs1,000cr. We have marginally
revised our FY2012E estimates downwards on account of a minimal Market Cap (Rs cr) 7,577
contribution from subsidiaries to the net profit during FY2010. At the current
valuations, we believe that the stock offers limited upside; hence, we Beta 0.6
downgrade JISL from Buy to Accumulate. 52 WK High / Low 1,211/463
Avg. Daily Volume 46624
Profit growth led by robust performance in Micro Irrigation System segment:
JISL’s 4QFY2010 results were ahead of our expectations, on account of the Face Value (Rs) 10
better growth in the MIS division. The key Revenue and EBITDA contributing BSE Sensex 17,142
MIS Segment showed a robust growth of 46% during the quarter. The PVC
Pipes Segment posted a strong growth of 25% in 4QFY2010, on the back of Nifty 5,136
robust growth across various markets. The Agro Products Division was
Reuters Code JAIR.BO
impacted by higher Raw Material (Onion) prices; however, this was buttressed
by a volume growth of 52% in the Onion and a 116% growth in the Fruits Bloomberg Code JI@IN
division. The reported PAT increased eight-fold to Rs117cr. However, after
Shareholding Pattern (%)
adjusting for forex gains, the adj. PAT for the quarter grew by 40% yoy to
Rs89cr (against Rs64cr during the same quarter last year), due to slower Promoters 30.8
growth in interest (3% yoy) and a 60% yoy growth in the other income.
MF/Banks/Indian FIs 9.5
Outlook and Valuation: We believe that, going ahead, the MIS Segment will FII/NRIs/OCBs 55.4
register healthy growth as the government’s focus on agriculture continues. Indian Public 4.3
We expect the Segment to continue to grow between 30-40% over the next
two years. In the case of the PVC Pipes Segment, a revival in demand is Abs. (%) 3m 1yr 3yr
visible. The Agro Products Segment and the Onion and Fruit businesses will
Sensex 6.5 41.4 24.6
continue to witness growth, and register stable Margins. However, at Rs949,
the stock is trading at 18x FY2012E FDEPS, which is near its fair value; hence,
JISL 22.5 97.0 115.8
we downgrade JISL from Buy to Accumulate.
Key Financials (Consolidated)
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 2,858 3,536 4,478 5,641
% chg 29.0 23.7 26.7 26.0
Adj. Net Profit 146 204 286 404
% chg 6.5 40.1 39.9 41.3
EBITDA Margin (%) 17.6 17.8 17.5 17.5
FDEPS (Rs) 20.1 26.9 37.6 53.1
P/E (x) 47.1 35.3 25.3 17.9
P/BV (x) 8.1 6.3 5.2 4.1
RoE (%) 16.5 20.0 22.5 25.8
RoACE (%) 17.1 17.7 19.3 22.4
Sageraj Bariya
EV/Sales (x) 3.0 2.5 2.0 1.6
Tel: 022 – 4040 3800 Ext: 346
EV/EBITDA (x) 17.0 14.2 11.5 9.1 E-mail: sageraj.bariya@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539
2. Jain Irrigations Systems I 4QFY2010 Result Update
Exhibit 1: Key Financial (Standalone)
Y/E March (Rs cr) 4QFY2010 4QFY2009 % chg FY2010 FY2009 % chg
Total Revenue 959 699 37.2 2735 2188 25.0
Total RM 575 408 1585 1288
as % of sales 60.0 58.5 58.0 58.9
Gross Profit 383 290 32.1 1150 900 27.8
Gross margin (%) 40.0 41.5 42.0 41.1
Staff cost 31 26 16.9 104 81 29.0
as % of sales 3.2 3.7 3.8 3.7
Other Expenses 154 107 44.3 469 357 31.3
as % of sales 16.1 15.3 17.1 16.3
Total Exp 760 542 40.4 2159 1726 25.1
as % of sales 79.3 77.5 78.9 78.9
EBITDA 198 157 26.2 576 462 24.8
EBITDA % 20.7 22.5 21.1 21.1
Depreciation 18 14 24.3 66 48 37.9
EBIT 180 143 26.4 511 414 23.3
EBIT % 18.8 20.4 18.7 18.9
Other Income 5 3 59.8 5 3 55.6
Interest 50 49 2.7 189 156 21.0
PBT 135 97 39.5 327 261 25.1
Extra-ord Items -34 21 -71 78
PBT 169 76 121.9 398 184 116.7
Total tax 52 63 125 64
tax rate 38 65 38 24
PAT 117 13 785.6 273 120 127.2
PAT (%) 12.2 1.9 10.0 5.5
Adj PAT 89 64 39.5 216 173 25.1
adj PAT (%) 9.3 9.2 7.9 7.9
Equity 76.0 72.4 76.0 72.4
Adj EPS 11.7 8.8 32.8 28.8 23.9 19.1
Source: Company, Angel Research
Key highlights of FY2010 (Standalone)
• The total revenue increased by 25% on the back of strong growth registered in
key divisions like MIS (37%), PVC pipes (27%) and Fruits (30%).
• The company was able to maintain its EBITDA margin, due to a high
contribution from the rich margin MIS division and low volatility in key raw
material prices.
• The Total Adj. PAT grew by 25.1%, to Rs216cr from Rs173cr in FY2009.
May 12, 2010 2
3. Jain Irrigations Systems I 4QFY2010 Result Update
Exhibit 2: Segmental Performance (Standalone)
Divisional performance 4Q FY10 4Q FY09 % chg FY2010 FY2009 % chg
(yoy) (yoy)
Revenue (Rs cr)
MIS 478 328 45.7 1302 952 36.8
PVC pipes 160 128 25.2 525 414 27.1
PE Pipes 104 93 11.7 317 334 (5.1)
PVC Sheet 42 28 47.9 116 117 (0.6)
PC sheets - 15 - 37 56 (34.8)
Onions 66 48 36.8 146 133 9.7
Fruit 104 60 73.8 285 218 30.3
Total 954 700 36.3 2728 2223 22.7
EBITDA (Rs cr)
MIS 154 106 45.4 410 283 44.8
PVC pipes 14 11 23.0 45 32 39.5
PE Pipes 13 12 12.8 39 42 (8.1)
PVC Sheet 3 5 (27.7) 13 16 (20.9)
PC sheets - 2 - 3 6 (49.2)
Onions 1 10 (87.0) 15 36 (58.0)
Fruit 15 11 35.1 57 43 32.2
Total 201 157 28.6 581 458 26.8
EBITDA (%)
MIS 32.3 32.4 - 31.5 29.8 -
PVC pipes 8.7 8.8 - 8.5 7.7 -
PE Pipes 12.7 12.6 - 12.2 12.6 -
PVC Sheet 8.1 16.5 - 10.8 13.6 -
PC sheets - 10.3 - 8.7 11.2 -
Onions 2.0 20.7 - 10.4 27.1 -
Fruit 14.4 18.5 - 19.9 19.6 -
Total 21.1 22.4 - 21.3 20.6 -
Source: Company, Angel Research
Key segmental highlights of FY2010 (Standalone)
• The MIS division maintained its dominance and momentum by growing at
37% for the year. It also increased its contribution to total EBITDA from 62%
in FY2009 to 71% in FY2010, on the back of higher margins, which came in
at 31.5% (29.8%).
• The Fruits sub-division (of agro) was the second-best performer, growing at
30% and contributing 10% to the total EBITDA (against 9% last year).
• The PVC division grew by 27% and increased its contribution to the total
EBITDA by 100bp to 8% in FY2010.
• The Onion Division’s performance was muted, due to higher raw material
prices (supply crunch, on account of drought)
May 12, 2010 3
4. Jain Irrigations Systems I 4QFY2010 Result Update
Quarterly performance
Exhibit 3: Standalone Revenue mix (%)
4QFY2009 4QFY2010
9
11
2 7
0 7
4
47 4
13 11 50
18 17
MIS PVC pipes PE Pipes PVC Sheet
MIS PVC pipes PE Pipes PVC Sheet
PC sheets Onions Fruit
PC sheets Onions Fruit
Source - Company, Angel Research
Changes in Revenue-mix continue: The revenue contribution from the high-Margin
MIS segment increased by 300bp to 50% (47%) in 4QFY2010. Contribution from
the PVC and PE Pipes Segments, however, dropped by 100bp and 200bp, to 17%
(18%) and 11% (13%), respectively.
Robust growth in MIS Segment: JISL’s key revenue and EBITDA contributing segment,
MIS, posted one of its fastest growths in the past five quarters. The company’s MIS
business grew by 46% yoy for 4QFY2010, and increased its contribution to 50% of
sales (47% in 3QFY2010 and 2QFY2010, and 45% in 1QFY2010). Himachal
Pradesh and Punjab were the fastest growing states for the company, and grew by
2.7x and 1.4x, respectively. The other key states that contributed to the growth were,
Gujarat (grew by 92%), Tamil Nadu (grew by 77%), Rajasthan (grew by 79%), and
Maharashtra (grew by 75%). The EBITDA Margin for the Segment during the quarter
remained steady at 32%.
Exhibit 4: MIS sales growth picks-up
100
87 85
80
60
% YoY
46
39 38
36
40 33
27
20
0
1QFY2009 2QFY2009 3QFY2009 4QFY2009 1QFY2010 2QFY2010 3QFY2010 4QFY2010
Source - Company, Angel Research
May 12, 2010 4
5. Jain Irrigations Systems I 4QFY2010 Result Update
Diversification of market helps PVC Pipes Segment: For the quarter, the Segment
grew by 25% yoy to Rs160cr, led by robust growth across the market. The key
Northern market posted a growth of 82%. The other key market that witnessed good
growth was Karnataka (54%), Tamil Nadu (41%) and Gujarat (39%). The EBITDA
Margin of the Segment remained steady at 8.8%.
Exhibit 5: PVC pipe sales’ trend
18
16
16 14 15
14 14 14
14
12
10
Rs cr
8 7
6
4
2
0
1QFY2009 2QFY2009 3QFY2009 4QFY2009 1QFY2010 2QFY2010 3QFY2010
Source - Company, Angel Research
PE Pipes Segment rebounds: After breaking the declining Sales trend in 2QFY2010,
the Segment continued on the growth path, driven by strong demand from the gas
segment (growth of 141%). The segment’s sales for 4QFY2010 grew by 12% to
Rs104cr, while the EBITDA Margin remained steady at 12.7%.
Exhibit 6: PE Pipes’ sales trend: on the rebound
110
104
93
95
85
Rs cr
80
72
65
56
50
4QFY2009 1QFY2010 2QFY2010 3QFY2010 4QFY2010
Source - Company, Angel Research
May 12, 2010 5
6. Jain Irrigations Systems I 4QFY2010 Result Update
Agro Products (onions and fruit puree): The Total Revenues of the Segment grew by
57%. The revenues of the Onion Segment increased by 37% to Rs66cr, while the
Total Volume grew 52% for the quarter. The Onion Segment continued to record
one of the lowest EBITDA Margins of 2%, due to higher raw material prices. The Fruit
Puree Segment witnessed a stupendous growth of 74% yoy to Rs104cr, while the
total volume grew by 116%, due to higher off take from key customers like Coke
(grew by 2.8x). The Division’s sequential decline in the EBITDA Margin continued,
which came in at 14%, due to a higher contribution from Totapuri mangoes
(realisation of Totapuri mangoes are lower than that of Alphonso mangoes).
Exhibit 7: Onion business-all time low EBITDA margins Exhibit 8: Fruit segment - strong uptick in demand
70 28 30 110 26 28
25
56 22 24 90
21 19 19 21
42 18 70 14
Rs cr
14
Rs cr
%
%
28 12 50
7
14 6 30
2 2
10 0
0 0
4QFY2009 1QFY2010 2QFY2010 3QFY2010 4QFY2010
4QFY2009 1QFY2010 2QFY2010 3QFY2010 4QFY2010
Sales EBITDA (%) Sales EBITDA (%)
Source - Company , Angel Research Source - Company , Angel Research
May 12, 2010 6
7. Jain Irrigations Systems I 4QFY2010 Result Update
Outlook and Valuation
Going ahead, we believe that the MIS Segment will continue to witness healthy
growth, as the Central government focuses on increasing farm output to tackle the
long-term food security issue, along with increasing the farmers’ income. We expect
the Segment to continue to grow between 30-40% over the next two years. In the
case of the PE Pipes Segment, a revival in demand is visible. The Agro Products
Segment (comprising of the Onion and Fruit businesses) will continue to witness
growth and register stable Margins.
We have marginally revised our FY2012E estimates downwards on account of a
minimal contribution from subsidiaries to the net profit during FY2010.
Exhibit 9: Segmental Performance (Consolidated)
Rs crore Old New % chg
FY2011 FY2012 FY2011 FY2012 FY2011 FY2012
Sales 4120 4930 4478 5641 8.7 14.4
EBITDA 721 858 784 987 8.7 15.1
EBITDA % 17.5 17.4 17.5 17.5
PAT 306 403 286 404 (6.7) 0.2
EPS 40.6 53.4 37.6 53.1 (7.4) (0.6)
Source: Company, Angel Research
At Rs949, the stock is trading at 18x FY2012E FDEPS, which is near to its fair value;
hence, we downgrade JISL from Buy to Accumulate, with a Target Price of Rs1,062.
May 12, 2010 7
8. Jain Irrigations Systems I 4QFY2010 Result Update
Profit & Loss Statement (Consolidated) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
Gross sales 1,458 2,304 2,945 3,642 4,613 5,810
Less: Excise duty 66 88 86 106 134 169
Net Sales 1,392 2,216 2,858 3,536 4,478 5,641
Other operating income
Total operating income 1,392 2,216 2,858 3,536 4,478 5,641
% chg 65 59 29 24 27 26
Total Expenditure 1,205 1,870 2,356 2,908 3,695 4,653
Net Raw Materials 781 1,177 1,551 1,909 2,418 3,046
Other Mfg costs 129 176 229 276 349 440
Personnel 125 245 293 325 412 519
Other 170 272 283 397 515 649
EBITDA 187 346 503 628 784 987
% chg 46 84 46 25 25 26
(% of Net Sales) 13 16 18 18 18 18
Depreciation& Amortisation 43 56 68 96 138 154
EBIT 144 290 434 532 646 833
% chg 73 101 50 22 21 29
(% of Net Sales) 10 13 15 15 14 15
Interest & other Charges* 77 137 244 202 229 241
Other Income 33 37 12 14 14 16
(% of PBT) 33 19 6 4 3 3
Recurring PBT 100 190 202 344 431 607
% chg 72 89 7 70 25 41
Extraordinary Expense/(Inc.) (1) (7) (7) 71 - -
PBT (reported) 99 183 196 415 431 607
Tax 20 54 66 139 145 204
(% of PBT) 20 30 34 34 34 34
PAT (reported) 79 129 130 275 286 404
Add: Share of earnings of
- - - - - -
associate
Less: Minority interest (MI) - 3 4 4 5 6
Prior period items 0 (2) 0 - - -
PAT after MI (reported) 79 126 126 271 280 397
ADJ. PAT 80 137 146 204 286 404
% chg 39 70 7 40 40 41
(% of Net Sales) 6 6 5 6 6 7
Basic EPS (Rs) 13 19 20 27 38 53
Fully Diluted EPS (Rs) 13 19 20 27 38 53
% chg 31 46 6 33 40 41
* including preference dividend
May 12, 2010 8
9. Jain Irrigations Systems I 4QFY2010 Result Update
Balance Sheet (Consolidated) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 62 72 72 76 76 76
Preference Capital 89 89 45 2 - -
Reserves& Surplus 264 713 780 1,069 1,311 1,663
Shareholders Funds 414 873 897 1,147 1,387 1,739
Minority Interest 10 65 70 75 80 87
Total Loans 859 1,276 1,817 1,820 2,002 2,022
Deferred Tax Liability - 11 71 102 90 32
Total Liabilities 1,284 2,225 2,855 3,144 3,559 3,879
APPLICATION OF FUNDS
Gross Block 862 1,262 1,750 2,150 2,450 2,695
Less: Acc. Depreciation 282 486 581 677 815 969
Net Block 580 776 1,170 1,474 1,636 1,726
Capital Work-in-Progress 79 120 121 121 123 135
Goodwill 66 120 167 167 167 167
Investments 20 60 20 20 20 20
Current Assets 999 1,873 2,312 2,458 2,999 3,624
Cash 44 104 117 142 202 231
Loans & Advances 116 287 320 352 401 506
Other 838 1,483 1,874 1,964 2,396 2,887
Current liabilities 514 741 964 1,125 1,414 1,822
Net Current Assets 484 1,132 1,348 1,333 1,585 1,802
Mis. Exp. not written off 54 16 30 30 30 30
Total Assets 1,284 2,225 2,855 3,144 3,559 3,879
Cash Flow (Consolidated) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Profit before tax 104 194 199 415 431 607
Depreciation 41 56 68 96 138 154
Change in Working Capital (120) (488) (18) 244 31 2
Less: Other income
Direct taxes paid (9) (23) (22) (139) (145) (204)
Cash Flow from Operations 16 (261) 227 616 455 560
(Inc.)/ Dec. in Fixed Assets (256) (291) (464) (400) (302) (257)
(Inc.)/ Dec. in Investments (64) (51) (6) - - 0
Inc./ (Dec.) in loans and adv. (320) (343) (470) (400) (302) (257)
Other income
Cash Flow from Investing (320) (343) (470) (400) (302) (257)
Issue of Equity 42 174 (43) 43 (3) -
Inc./(Dec.) in loans 159 596 530 3 182 20
Dividend Paid (Incl. Tax) (26) (20) (23) (35) (43) (52)
Others (66) (136) (183) (202) (229) (241)
Cash Flow from Financing 109 615 281 (191) (93) (273)
Inc./(Dec.) in Cash (195) 11 38 25 60 29
Opening Cash balances 239 56 67 117 142 202
Closing Cash balances 44 67 105 142 202 231
May 12, 2010 9
11. Jain Irrigations Systems I 4QFY2010 Result Update
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Jain Irrigation
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies’ Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel : (022) 3952 4568 / 4040 3800
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM /
CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
May 12, 2010 11
