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th
June 2014

India Equity Institutional Research | Agro Products



Jain Irrigation Systems Rs. 118

On the path of recovery BUY

Jain Irrigation Systems (JISL) is currently the worlds second largest and
Indias largest micro irrigation company. It has four major business
divisionsmicro irrigation systems (MIS), piping systems, agro processing,
and plastic sheets. Apart from these, it also derives a minor portion of
revenues from tissue culture, hybrid & grafted plants, and solar devices.

Big industry opportunity & improvement in WC due to NBFC model
India is likely to have an an opportunity of ~INR 450 bn under micro irrigation
over the next six to seven years. JISL stands to gain the most, being the
market leader in this space. Standalone sales of JISLs MIS segment have
posted a CAGR of 36% during 2005-13. Revenue for MIS business clocked -
4% CAGR over FY12-14 largely due to deliberate reduction in business in
states like TN, AP and Karnataka. Going forward, we expect revenue to post a
21% CAGR over FY14-16E, led by strong growth in Maharashtra.

PVC pipes will drive growth with infrastructure improvement
JI is primarily present in the agri-piping segment of PVC pipes. Since JI
already has a strong foothold in the agriculture space through its dominance
in the MIS business, agri-pipes is a complimentary business for the company.
Thus, demand for rigid PVC pipes is expected to increase driving growth for JI
in this segment. Revenue for piping segment has posted 15% CAGR over
FY12-14. We expect this segment to maintain its growth rate and post 15%
CAGR over FY14-16E from INR13.1b to INR17.3b.

Indias largest player in food processing industry
JI is Indias largest player in the food processing sector, with a market share
of ~30% and is the third largest in the world. Its food processing business is
involved in processing of onion, vegetable dehydration and fruit processing.
JIs extensive experience and high involvement with the farmers have given it
an edge in the most crucial aspect of the food processing business, sourcing.

Outlook and valuations: Positive; maintain BUY
We anticipate the domestic MIS business to post sustainable strong growth
with better balance sheet, going forward. However, debt reduction remains
key for the stock. We maintain BUY with target price of Rs 153.

Exhibit 1: Key Financial
Income Statement FY12 FY13 FY14 FY15E FY16E
Revenue 4,921 5,022 6,043 7,053 8,241
EBITDA 816 742 833 972 1,135
Adj Reported PAT 224 43 206 300 453
EBITDAM% 16.6 14.8 13.8 13.8 13.8
EV/ EBITDA 11.5 12.5 11.0 9.1 7.5
RoE (%) 13.5 2.2 9.1 12.1 16.1
RoCE (%) 14.0 11.1 11.0 13.0 15.4
Source: Company data; KR Choksey Research

Target Price (Rs.): 153

Potential Upside : 30%

Previous TP (Rs.): 85
Market Data
Shares outs (Cr) 45.5
Equity Cap (Rs Cr) 91.0
Mkt Cap (Rs Cr) 5,386
52 Wk H/L (Rs) 126 / 46
Avg. Vol (1yr Avg.) 4,660
Face Value (Rs) 2
Bloomberg Code JI IN


Market Info:
SENSEX 25,019
NIFTY 7,474


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Sensex Jain Irrigation

Share Holding pattern (%)
Particulars 14-Mar 13-Dec 13-Sep
Promoter 28.69 27.46 27.46
FII 39.14 52.44 52.32
DII 13.43 1.56 0.76
Others 18.74 18.54 19.46
Total 100 100 100
Source: BSE





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91-22-6696 5555
91-22-6691 9569



Jain Irrigation Systems
2 KRChoksey - Institutional Research

Jain Irrigation Systems (JISL) is currently the worlds second largest and Indias largest micro irrigation company. It
has four major business divisionsmicro irrigation systems (MIS), piping systems, agro processing, and plastic sheets.
Apart from these, it also derives a minor portion of revenues from tissue culture, hybrid & grafted plants, and solar
devices.

Business Model FY12 FY13 FY14 FY15E FY16E
Revenue
Micro Irrigation Systems 1,885 1,425 1,745 2,114 2,566
Plastic Piping Systems 986 1,127 1,302 1,502 1,732
PE & PVC sheets 183 154 186 224 270
Agro Processing 544 574 674 833 1,030
Solar Systems 180 226 252 286 322
Tissue Culture Plants 46 70 95 118 136
Net Subsidiary Sales 961 1,429 1,770 1,957 2,165
Others 137 17 20 20 20
Total Sales 4,920 5,022 6,043 7,053 8,241
EBITDA
Micro Irrigation Systems 565 385 384 465 565
Plastic Piping Systems 69 79 65 90 104
PE & PVC sheets 13 8 9 13 16
Agro Processing 109 109 115 142 185
Solar Systems 40 41 45 52 58
Tissue Culture Plants 10 13 17 21 24
Net Subsidiary Sales 67 86 142 137 152
Others 30 3 4 4 4
Total EBITDA 903 722 780 923 1,108


Expect revenue CAGR of 16.8% over FY14-16E
We expect consolidated revenue to post a CAGR of 16.8% led by strong growth in food processing and MIS businesses, which are expected to
clock 23% CAGR and 21% CAGR respectively over FY14-16E. We expect overseas business to post a moderate 10% CAGR over FY14-16E.

EBITDA to grow in line with revenue growth; margins to be maintained
We expect EBITDA to grow in line with revenue at 16% CAGR over FY14-16E. We expect margins to be maintained at current levels of 13.8%.

Working capital cycle set to improve
We expect the consolidated working capital days to improve from 234 days in FY13 to 160 in FY16E, largely led by MIS business

Operating and free cash flows to improve led by improving working capital; capex to be limited to
maintenance related over FY14-16E
Operating cash flows are expected to improve significantly to INR8.9b, while free cash is expected to improve to INR6.8b over FY14-16E led by
an improvement in working capital in MIS business. We expect capex to be limited to maintenance related and be capped at INR2b for
FY14-16E.
Debt-equity to decline to 1x on the back of robust cash generation
We expect net debt to equity to decline from 1.6x to 1.0x as cash generated from improved working capital is utilized towards retiring of debt.
3QFY14 saw JIs long term debt upgraded to investment grade rating BBB minus. Short term debt however has a rating of A3, which
management expects to go to A1 in 1QFY15. Improvement in credit ratings resulted in lower domestic cost of debt which declined from 13.7%
to 12.2% in 3QFY14.

Return ratios to witness improvement
With 16.8% revenue CAGR, stable margins and improvement in working capital, we expect JIs return ratios to improve over FY14-16E.
We expect RoCE to improve from 11.0% in FY14 to 15.4% in FY16E, similarly we expect RoE to improve from 9.1% in FY14 to 16.1% in
FY16E.


Jain Irrigation Systems
3 KRChoksey - Institutional Research


P&L account

Consol Financials FY12 FY13 FY14 FY15E FY16E
Income Statement
Revenue 4,921 5,022 6,043 7,053 8,241
Total expenses 4,105 4,280 5,210 6,082 7,105
EBITDA 816 742 833 972 1,135
Depriciation 144 170 184 194 203
EBIT 671 572 648 778 932
Interest 477 517 459 423 388
Other income 35 67 18 21 25
PBT 229 13 27 376 569
Tax expense 0 8 0 75 114
Adj Reported PAT 224 43 206 300 453

Balance Sheet
Shareholders' funds 1,754 2,168 2,347 2,615 3,026
Share capital 81 91 91 91 91
Reserves and surplus 1,673 2,077 2,256 2,524 2,935
Minority interest 0 0 0 0 0
Loan funds 3,799 3,825 3,825 3,525 3,225
Total Source of funds 5,778 6,177 6,357 6,324 6,435
Fixed assets 2,374 2,610 2,626 2,632 2,628
Investment 24 4 4 4 4
Net current Assets (excl cash) 3,111 3,397 3,546 3,492 3,589
Cash and bank balances 331 236 70 85 59
Total applications of fund 5,778 6,177 6,357 6,324 6,435

Cash flow
Change in working capital (617) (316) (314) 68 (123)
Cash flow from operations 85 346 518 964 899
Capital expenditure (58) (101) (33) (40) (45)
Change in Investments (527) (294) (215) (215) (217)
Net cash from financing 368 (98) (487) (756) (732)
Closing cash balance 331 236 70 85 59

Ratios
EBITDAM% 16.6 14.8 13.8 13.8 13.8
Debt/ Equity (x) 2.2 1.8 1.6 1.3 1.1
EV/ EBITDA 11.5 12.5 11.0 9.1 7.5
RoE (%) 13.5 2.2 9.1 12.1 16.1
RoCE (%) 14.0 11.1 11.0 13.0 15.4








Jain Irrigation Systems
4 KRChoksey - Institutional Research


Rajiv Choksey Director rajiv.choksey@krchoksey.com +91-22-6696 5555
Anuj Choksey Head-Institutional Equities anuj.choksey@krchoksey.com +91-22-6696 5500

Jain Irrigation Systems Ltd


CMP (Rs) TP (Rs) Recommendation
7-June-2014 118 153 BUY
13-Nov-2013 64 85 BUY
21-Aug-2013 53 85 BUY
3-June-2013 69 90 BUY
7-Feb-2013 67 90 BUY


Rating Legend
Our Rating Upside
Buy More than 15%
Accumulate 5% - 15%
Hold 0 5%
Reduce -5% 0
Sell Less than -5%

Disclaimer:
This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a
security. While the information contained therein has been obtained from sources believed to be reliable, investors are advised to
satisfy themselves before making any investments. Kisan Ratilal Choksey Shares & Sec Pvt Ltd., does not bear any responsibility for the
authentication of the information contained in the reports and consequently, is not liable for any decisions taken based on the same.
Further, KRC Research Reports only provide information updates and analysis. All opinion for buying and selling are available to
investors when they are registered clients of KRC Investment Advisory Services. As per SEBI requirements it is stated that, Kisan Ratilal
Choksey Shares & Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or
sale thereof while this report is in circulation.




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