Jain Irrigation Systems: Q1FY15 Results Analysis

Jain Irrigation System announced its June 2014 quarter results and the results are much below the street estimates. Considering the various factors like expected El Nino impact and other factors like change in policies by Government, the company was expected to put in a strong performance for the June quarter. Apart from that, the company had opted for a new model for financing the farmers which would have helped the company improve its performance on working capital front.  

However the results are below the street estimates with topline for the June 2014 quarter increasing to Rs 1593.40 crore from the levels of Rs 1455.10 crore in June 2013 quarter. The company could not put up a great show at operational levels also. Despite increase in sales for the quarter, EBITDA declined to Rs 210.60 crore from earlier levels of Rs 220.10 crore. We are of the opinion that margins were impacted due to implementation of their new business model, lower pipes business pinned with higher raw material costs. Additionally, higher depreciation weighed on the bottomline.

Its domestic Micro Irrigation System (MIS) business has grown around 30% after 9 quarters backed by a reduction in their MIS receivables by Rs 40 crore in April-June quarter. According to reports, Anil Jain, MD, Jain Irrigation further expects MIS revenue growth of 20% in FY15. In addition, the irrigation company’s food business grew at 44% in this quarter with an anticipated growth of 20% this fiscal in the same space. 

On the bottomline front, PAT for the quarter ended June 2014 stood at Rs 20.10 crore against a loss of Rs 60.30 crore in the similar quarter last fiscal. We feel, uncertainty on the monsoon front has also affected the sentiments. However the management is quite confident of putting up a better show in coming quarter as and when the new model is completely implemented.  Hence one can take the fall in scrip prices as an opportunity to accumulate the stock with a perspective of more than 12 months.