News @ Jains - Jain Irrigation Systems (JISL) continues to maintain its steep growth

Jain Irrigation Systems (JISL) continues to maintain its steep growth traction, as revenues surge by 50% in Q1FY07 at Rs. 2.3bn. Micro Irrigation continues to spearhead the growth at 116%, well backed by PVC pipes (33%yoy growth), PE pipes (54%) and PVC Sheets (69%). Improved product mix in favour of high margin MIS and PVC Sheets business has helped to maintain EBITDA margins, albeit higher resin prices and selling and distribution expenses. Adjusted PAT has grown by 89% at Rs. 215m and after accounting for forex translation loss, PAT is up by 64% at Rs. 175m.

JISL’s focused and derisked agri-business model has started playing out, as more micro irrigation projects go on stream. Announcements in recent union budget, higher subsidy allocation and consistent 100%+ growth in MIS business, reassures that Rs615bn micro irrigation opportunity will not just stay on paper. JISL’s other business segments are also maintaining strong growth momentum and can be potentially scaled up to JISL’s existing size. While we have always liked JISL’s business model, we also like JISL’s rapid expansion plans, willingness to play in the global markets and appetite to take inorganic growth route. JISL is doubling its capacity in most of the SBUs and has also up the ante on acquisitions. We expect JISL’s revenues growing at 32% and PAT at 53% over FY06-FY08. At 216, the stock currently trades at 9.7x FY08E earnings. Reiterate Outperformer.

SSKI Report - Jain Irrigation Systems Ltd. - Outperformer FY07