Sunday, June 28, 2009

Multi bagger recommendation - JMC Projects.

Today, anything even remotely connected to infrastructure is a hot pick on the bourses. So if there is a company which is into construction of highways, power projects, urban and rural infrastructure, airports, ports, railway terminals and has also posted a good performance, would surely have investors flocking to the stock like hot cakes. And rightly so. JMC Projects has been on a hot trail since the day it announced its financial performance for the year and quarter ended 31st March 2009.

For the fourth quarter ended 31st March 2009, the net sales rose 18.22% to Rs 366.28 crore on a YoY. Net profit jumped up by a smart 70% at Rs 16.30 crore. For FY09, the company posted a 44% rise in net sales at Rs 1319.29 crore. Net profit was up 20% at Rs 36.76 crore.

The biggest strength of the company is that it is a subsidiary of Kalpataru Power which holds 53% stake. This has given major synergistic advantages to the company. It is expected that given the impetus to power, both the companies would be jointly bidding for the power transmission projects on BOT model

JMC’s strength is civil construction and with already having bagged Govt orders, it is expected to benefit from the forthcoming Budget where allocations for urban infra is expected to go up further. JMC is planning to enter the BOT space especially the roads segment and this is also expected to add on hugely to the bottomlines in the coming years.

Another unique strength of the company is that is procures all its raw material from its 100% subsidiary - JMC Mining and Quarrying which makes raw material required by the construction industry. This in-house procurement saves the company from untoward cost escalations. Business for JMC is growing is expanding rapidly which is evident from the plans to expand the capacity of the subsidiary by 50%.

The company had on 29 January 2009 said it would raise Rs 40 crore through issue of equity shares on rights basis. The ratio and the issue price will be decided before the opening of the issue.

The stock hit a 52-week high of Rs 234 on 5th June 2008 and a 52-week low of Rs 45 on 27th January 2009. A month ago, the stock was languishing at Rs 78 and after the UPA Government got elected and the frenzy for infra stocks begun, this stock has surged over two times and based on the expected performance in FY10, a lot more steam seems to be left in the stock.

Promoter’s stake is 55.64%, institutional holding is 14.60% and bodies corporate hold 4.42%, leaving a floating stock of 25.34%. The company's current equity is Rs 18.14 crore. Face value per share is Rs 10. EPS for FY09 is at a very healthy Rs 20.26, giving a reasonable PE of 9.

At the current price of Rs 157.05, the stock is a prime pick with an eye on the future. Given the thrust on infra, the stock holds immense potential and can give excellent returns over the next 12-15 months.

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