HDFC Securities sees 26% upside in this Mukul Agrawal stock

Domestic brokerage firm Securities has initiated coverage on (JKIL) and sees an upside potential of up to 26 per cent in the counter under bull case scenario.
is a pure play EPC company with a niche in urban infra projects, engaged in the construction of elevated and underground metro projects, roads, flyovers and bridges and civil construction activities.

It has executed projects in a wide variety of spectrum, ranging from underground and elevated metros to tunnels, flyovers, roads, pedestrian subways, stations and depots, to hospitals, commercial buildings and sports complexes.

Brokerage firm has a target price of Rs 283 in the base case, whereas a target price of Rs 323 in the bull case, signaling a potential upside of 11 per cent and 26 per cent, respectively, from its previous close of Rs 254.8.

The brokerage has suggested buying the construction player in the range of Rs 253-258 and add the counter in the range of 230-234 to make the best of it. From the lowest buy price band, the scrip can rally up to 40 per cent.

JKIL has reiterated its target of achieving a topline of Rs 5,000 crore by FY25 and maintaining its current margin level of 14-15 per cent on the back of its prudent bidding discipline, said the brokerage firm.

“Leveraging its execution skills and technical expertise, the company has repeatedly received orders from MMRDA, NHAI and DMRC, over the years,” it added. The order book stood at Rs 11,936cr, indicating a robust visibility of 3.4x of FY22 revenue.”

Dalal Street veteran Mukul Mahavir Agrawal held 21,00,100 equity or 2.78 per stake in the company as of March 31, 2022. The worth of its stake in the company is around Rs 53.5 crore.

The company’s 61 per cent of the order books comes from metro projects including elevated metro (29 per cent) and underground metro projects (32 per cent), flyovers (26 per cent), roads (5 per cent) and other civil works (8 per cent).

The company is targeting opportunities in metro-rail in Chennai, Kanpur, Agra and Nagpur. Opportunities in roads and highways, high-speed rail and water pipeline and tunneling projects are also being eyed.

JKIL has a robust bid pipeline of Rs 20,000 crore (expecting 25 per cent strike rate) with metro, water, highways & roads and building & hospitals at Rs 6,000 crore, Rs 3000 crore, Rs 6000 crore and Rs 5,000 crore, said HDFC Securities.

Promoters hold 46.6 per cent stake in the company, whereas institutional investors have 17 per cent stake. Remaining 36.4 per cent stake of the company is owned by non-institutional investors.

JKIL is one of the key beneficiaries of increasing government focus on the urban mobility space over the next few years. Its focus on margins and cash flow generation augurs well from a long-term perspective, said the brokerage firm

“Over the years, the company has transformed itself into one of the leading EPC contractors and has grown its order book and revenue at a healthy rate with good margins,” it added.

“JKIL has also increased its geographical footprint, leading to superior scalability and recognition. Given its target of Rs 5,000cr topline in FY25; the company needs to garner more order flows to improve its book-to-bill ratio thereby improving revenue visibility.”

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)

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