J Kumar Infra hit 5% upper circuit limit on brokerage upgrades

NEW DELHI: Shares of J Kumar Infra hit the 5 per cent upper circuit limit after foreign brokerage CLSA said it was bullish on the stock as it offers a play on urbanisation capex given its successful entry into the metro rail segment.

“With the recent order wins, JKI plans to focus on execution till the dust settles on the BMC issue. We like JKI's regional focus, control over machinery and aggregates, aversion to debt, hands-on promoters and a shift to complex projects, which have given it industry-leading margins," CLSA said.

Following the development, the stock jumped 5 per cent to Rs 178.90 on BSE. Despite gains, the stock is ruling 60 per cent lower from its 52-week high of 449.75 hit last October.

“We expect that FY17-18E would be driven by execution of the large order backlog (nearly Rs 10,000 crore including metro orders; nearly 7 times FY16 revenues). However, we cut our revenue estimate by 5 per cent/ 3 per cent for FY17E/18E on account of delay in execution of the metro order,” Karvy Stock Broking said in a note.

The brokerage, which has a price target of Rs 300 on the stock, said: “Valuation at 9.2 times/6.5 times on FY17E/18E earnings looks attractive post the recent fall and factors in most of the negative news flow. We reduce our target PE multiple to 12 times (from 13 times) to value FY18E earnings (largely due to delay in execution of metro orders and risk of bidding in BMC orders).”