2QFY2013 Result Update | Capital Goods

November 9, 2012

Jyoti Structures
Performance Highlights
Quarterly Highlights (Standalone)
(` cr) Revenue EBITDA EBITDA margin (%) Reported PAT 2QFY13 593 57 9.7 12 2QFY12 632 68 10.8 22 % chg (yoy) (6.2) (15.8) (111)bp (46.0) 1QFY13 655 64 9.8 17 % chg (qoq) (9.4) (10.6) (13)bp (31.1)

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Capital Goods 359 841 1.4 60/35 110,340 2 18,684 5,686 JYTS.BO JYS@IN

`44 `53
12 Months

Source: Company, Angel Research

Jyoti Structures (Jyoti)s 2QFY2013 performance was below our expectations, with the top-line declining by 6.2% yoy to `593cr. The companys EBITDA came in at `57cr, 15.8% lower yoy. The EBITDA margin contracted 111bps following tough competition in the sector and is presently at 9.7%. Jyotis interest coverage multiple remains under stress, declining from 2.6x in 1QFY2012 to 1.6x presently. The increase in receivables has led to higher working capital borrowing, elevating the interest cost. Consequently, the PAT declined by 46.0% yoy to `12cr. Strong order inflow: The company reported a strong order inflow of `801cr in 2QFY2013. The order flow from Power Grid Corporation of India (PGCIL) is expected to retain traction; we therefore see order inflows for Jyoti to remain stable. Jyotis order backlog stood at `4,800cr up 9.7% yoy. However the companys order coverage has been lower at 1.7x over the past few quarters. The order backlog was spread across transmission (60%), substation (25%) and distribution (15%) segments. Client-wise, the backlog mainly constituted of orders by PGCIL (29%), West Bengal (15%), Maharashtra (12%), MP (6%), overseas (15%) and the private sector (5%). The company received major orders from Kenya and Uganda which boosted its overseas segments contribution to the top-line. Outlook and valuation: Jyotis robust order book and recent focus to scale up its overseas operation to insulate itself from domestic headwinds will benefit the company in the medium to long term. The stock is currently trading at 3.7x our FY2014E EPS. Given the attractive valuations, we maintain our Buy rating on the stock, assigning a multiple of 4.5x FY2014E EPS, to arrive at a target price of `53.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 27.8 17.8 14.3 40.2

Abs. (%) Sensex JYS

3m 6.4

1yr 7.6

3yr 13.2 (69.7)

13.8 (28.1)

Key financials (Consolidated)

Y/E March (` cr) Net sales % chg Net profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 2,400 12.7 100 18.4 11.2 12.1 3.6 0.6 18.7 25.4 0.3 2.9

FY2012 2,678 11.6 92 (8.0) 11.0 11.2 3.9 0.5 14.9 19.6 0.5 4.1

FY2013E 2,794 4.3 76 (17.6) 10.6 9.2 4.7 0.5 10.9 16.0 0.4 3.7

FY2014E 3,048 9.1 96 27.1 10.6 11.7 3.7 0.4 12.5 17.2 0.4 3.4

Amit Patil 022-39357800 Ext: 6839 amit.patil@angelbroking.com

Please refer to important disclosures at the end of this report

Jyoti Structures | 2QFY2013 Result Update

Exhibit 1: Quarterly performance (Standalone)

(` cr) Net Sales Other operating income Total income Stock adjustments Raw Material (% of total income) Erection and sub contracting exp. (% of total income) Employee Cost (% of total income) Other Expenses (% of total income) Total Expenditure EBITDA (EBITDA %) Interest Depreciation Other Income PBT (% of total income) Total Tax (% of PBT) Reported PAT (PAT %) EPS (`)
Source: Company, Angel Research

2QFY13 592 1 593 4 320 54.6 125 21.0 23 3.8 64 10.8 535 57 9.7 35 6 1 16 3.0 6 33.6 12 2.0 1.5

2QFY12 632 0 632 5 353 56.6 125 19.7 20 3.2 61 9.6 564 68 10.8 31 6 2 33 5.3 11 33.7 22 3.5 2.7

% chg (yoy) (6.3) (6.2) (9.4) (0.1) 11.4 5.6 (5.0) (15.8) 13.6 12.4 (68.0) (51.0) (46.3) (46.0)

1QFY13 654 1 655 10 350 55.0 147 22.5 23 3.5 61 9.3 590 64 9.8 34 6 2 26 4.0 8.7 33.4 17 2.6 2.1

% chg (qoq) (9.4) (9.4) (8.6) (15.3) (0.4) 6.0 (9.3) (10.6) 3.9 1.4 (69.5) (37.1) (30) (31.1) (31.1)

1HFY13 1,246 2 1,248 15 669 54.8 272 21.8 46 3.7 125 10.0 1,126 121 9.7 69 12 3 42 3.4 15 34.7 28 4.1 3.6

1HFY12 1,270 1,270 (13) 741 57.4 244 19.3 40 3.2 119 9.3 1,131.6 138 10.9 58 11 3 72 5.7 24 33.3 48 6.5 5.9

% chg (yoy) (1.9) (1.7) (9.7) 11.1 13.7 5.5 (0.5) (12.2) 19.2 12.3 (41.4) (38.9) (42.7) (39.4)

Exhibit 2: Actual vs Estimates

(` cr) Revenue EBITDA PAT
Source: Company, Angel Research

Actual 593 57 12

Estimates 651 65 18

Var (%) (8.9) (12.1) (33.5)

November 9, 2012

Jyoti Structures | 2QFY2013 Result Update

Revenue declines by 6.2% yoy

Jyotis revenues were below our expectations, declining by 6.2% yoy to `592cr on account of slower execution. The companys EBITDA came in at `57cr, 15.8% lower yoy. The EBITDA margin contracted 111bps following tough competition in the sector and is presently at 9.7%. We expect the company to continue to operate at these levels over the coming quarters. Consequently, the PAT declined by 46.0% yoy to `12cr

Exhibit 3: Trend in revenues

800 700 600 500 400 300 542 551 722 638 632 587 735 655 593 200 100 0 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 14.7 7.9 31.8 13.0 16.5 6.5 1.9 2.7 (6.2) 35 30 25 20 15 10 5 0 -5 -10

Exhibit 4: Trend in EBITDA

90 80 70 60 50 40 30 20 10 0 11.6 11.4 11.6 11.0 10.8 10.1 11.2 9.8 9.7 14 12 10 8 6 4 63 63 84 70 68 59 82 64 57 2QFY13 6 4.1 3.5 2.4 2.6 2.0 4.3 5 4 3 2 25 25 35 26 22 14 31 17 12 1 0 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 2 0 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

Sales (` cr, LHS)

Growth (yoy %, RHS)

EBITDA (` cr, LHS)

EBITDAM (%, RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Interest cost pressure remains

Jyotis interest coverage multiple remains under stress, declining from 2.6x in 1QFY2012 to 1.6x presently. The increase in receivables has led to higher borrowing, thus elevating the interest cost. In light of the deteriorating working capital cycle (higher levels of working capital borrowing), we expect interest costs to remain elevated going forward.

Exhibit 5: Interest coverage ratio

3.3 3.1 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 1.7 2.5 3.2 3.1 3.0 2.6 2.2 2.0 1.9 1.6

Exhibit 6: Trend in PAT

40 35 30 25 20 15 10 5 4.6 4.5 4.8

Adj. PAT (` cr, LHS)

PATM (%, RHS)

Source: Company, Angel Research

Source: Company, Angel Research

November 9, 2012

Jyoti Structures | 2QFY2013 Result Update

Order flows remain stable

The company reported a strong order inflow of `801cr in 2QFY2013. The order flow from PGCIL is expected to retain traction; we therefore see order inflows for Jyoti to remain stable. Jyotis order backlog stood at `4,800cr up 9.7% yoy. However the companies order coverage has been lower at 1.7x over the past few quarters. The order backlog was spread across transmission (60%), substation (25%) and distribution (15%) segments. Client wise, the backlog mainly constituted of orders by PGCIL (29%), West Bengal (15%), Maharashtra (12%), Madhya Pradesh (6%), overseas (15%) and private sector (5%). The company received major orders from Kenya and Uganda which boosted its overseas segments contribution to the top-line.

Exhibit 7: Order Book coverage ratio

2.0 2.0 1.9 1.9 1.8 1.8 1.7 1.7 1.6 1.6 1.5 2.0 1.9 1.9 1.8 1.8 1.7 1.7 1.7 1.7

Exhibit 8: Order backlog growth

5,000 4,800 4,600 4,400 4,200 4,250 4,000 3,800 3,600 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 1.7 4,100 4,500 4,470 9.8 8.4 8.9 2.9 4.9 (3.6) 2.9 9.7 17 12 7 2 4,375 4,300 4,340 4600 4800 2QFY13 -3 -8

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

Order backlog

Growth (yoy %, RHS)

Source: Company, Angel Research

Source: Company, Angel Research

November 9, 2012

Jyoti Structures | 2QFY2013 Result Update

Investment arguments
Growth opportunity on cards: Globally the thumb rule entails that for every rupee invested in generation, an equivalent amount is to be invested in transmission and distribution (T&D). However, India has spent only 50% on T&D of what has been spent on generation in recent years, thus creating a huge opportunity for players in the T&D space. PGCIL has envisaged a T&D capex of `1 lakh cr for the 12th plan, 55% of which is expected to be deployed in transmission and substation projects, thus providing an array of opportunities to Jyoti, given its strong foothold in the T&D segment. Diversification to gradually materialize: Jyoti has been actively tapping the overseas markets by entering into JVs in South Africa and the Gulf. In addition, the company recently forayed into the US by setting up a transmission tower plant (revenue potential of ~`340cr annually - @100% capacity utilization). We believe these ventures will benefit the company in the long run, thereby insulating it from domestic headwinds. Outlook and valuation: Jyotis robust order book and recent focus to scale up its overseas operation to insulate itself from domestic headwinds will benefit the company in the medium to long term. The stock is currently trading at 3.7x our FY2014E EPS. Given the attractive valuations, we maintain our Buy rating on the stock, assigning a multiple of 4.5x FY2014E EPS, to arrive at a target price of `53.

Exhibit 9: Peer comparison

Company ABB* BHEL BGR Energy Crompton Greaves JSL KEC International Thermax Reco. Sell Neutral Neutral Buy Buy Accum Neutral CMP (`) 729 232 266 113 44 64 594 Tgt. price (`) 593 145 53 73 Upside (%) (18.7) 28.3 21.4 14.9 P/BV(x) FY13E 5.5 2.8 1.5 1.9 0.5 1.3 3.8 FY14E 4.8 2.4 1.4 1.7 0.4 1.1 3.3 P/E(x) FY13E 50.4 9.4 10.6 28.4 4.7 8.9 21.1 FY14E 29.5 10.6 9.5 14.6 3.7 7.0 19.1 FY2012-14E EPS CAGR 68.4 (13.2) (5.3) 15.5 2.2 5.8 (4.1) RoE (%) FY13E 11.6 33.5 31.1 6.9 10.9 22.0 19.2 FY14E 17.6 24.5 27.1 12.6 12.5 23.2 18.5

Source: Company, Angel Research;*Note: December year ending

November 9, 2012

Jyoti Structures | 2QFY2013 Result Update

Exhibit 10: One year forward PE Band

350 280 210 (`) 140 70 0 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jan-07 Apr-07 Jan-08 Apr-08 Jan-09 Apr-09 Jan-10 Apr-10 Jan-11 Apr-11 Jan-12 Apr-12 Jul-12

Share Price (`)

3x

7x

11x

15x

Source: Company, Angel Research

Company background
Jyoti is one of the leading EPC players in the transmission line and substation segments with business presence across transmission line towers, substation and rural electrification. The company offers a wide range of services in design, engineering, tower testing, manufacturing, construction and project management. In addition to its strong domestic presence, Jyoti is also exploring T&D capex opportunities on the global front through recent overseas JVs and investments (Jyoti America and Gulf Jyoti).

November 9, 2012

Jyoti Structures | 2QFY2013 Result Update

Profit and loss statement (Consolidated)

Y/E March (` cr) Operating income % chg Total Expenditure Raw Materials Mfg costs Personnel Costs Other Costs EBITDA % chg (% of Net Sales) Depreciation& Amortization EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of asso. Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg
previous year numbers

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 1,839 33.9 1,632 1,204 220 46 162 208 18.0 11.3 10 198 17.2 10.7 69 6 4.2 134 9.0 0 134 49 36.7 85 0 0 0 85 85 14.2 4.6 10.4 10.4 13.5 2,130 15.8 1,901 1,250 378 72 201 229 10.2 10.7 18 211 6.7 9.9 80 6 4.6 138 2.3 1 137 53 38.7 83 0 0 0 83 84 (0.9) 4.0 10.3 10.3 (1.3) 2,400 12.7 2,132 1,345 459 77 250 268 17.2 11.2 21 247 17.1 10.3 96 5 3.1 156 13.5 0 156 56 36.1 100 0 0 (0) 100 100 18.4 4.2 12.1 12.1 18.2 2,678 11.6 2,383 1,370 620 101 292 295 10.1 11.0 23 272 10.2 10.2 144 8 5.5 136 (12.9) 0 136 43 31.6 93 0 1 0 92 92 (8.0) 3.4 11.2 11.2 (8.0) 2,794 4.3 2,514 1,541 591 103 279 280 (5.2) 10.0 27 253 (7.1) 9.0 145 7 6.1 115 (15.3) 0 115 37 32.5 78 0 0 0 78 78 (15.3) 2.8 9.5 9.5 (15.3) 3,048 9.1 2,764 1,703 643 113 305 284 1.6 9.3 31 253 0.2 8.3 118 9 6.3 144 24.9 0 144 47 32.5 97 0 0 0 97 97 24.9 3.2 11.8 11.8 24.9

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

November 9, 2012

Jyoti Structures | 2QFY2013 Result Update

Balance sheet (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves & Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Deferred Tax Asset Current Assets Cash Loans & Advances Inventories Debtors Others Current liabilities Net Current Assets Mis. Exp. not written off Total Assets
previous year numbers

FY2009 FY2010 FY2011 16 0 402 419 0 313 9 740 190 55 135 4 0 17 0 1,133 39 228 153 712 0 550 583 1 740 16 0 475 491 0 369 18 878 244 69 175 2 0 17 0 1,350 54 185 247 863 0 665 684 0 878 16 0 560 576 0 477 18 1,071 283 87 196 8 0 17 0 1,572 67 180 231 1,093 0 722 850 0 1,071

FY2012 FY2013E FY2014E 16 0 644 660 1 918 125 1,704 324 100 223 169 0 22 0 2,200 54 222 295 1,569 60 911 1,290 0 1,704 16 0 708 724 1 813 125 1,664 364 127 237 249 0 17 0 1,863 81 220 269 1,294 0 701 1,162 0 1,664 16 0 794 811 1 813 125 1,750 419 158 261 199 0 17 0 2,009 74 252 280 1,403 0 735 1,274 0 1,750

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

November 9, 2012

Jyoti Structures | 2QFY2013 Result Update

Cash Flow statement (consolidated)

Y/E March (` cr) Profit before tax Depreciation (Inc)/Dec in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec.in Fixed Assets (Inc.)/Dec. in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances
previous year numbers

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 134 10 (70) (6) (49) 20 (80) (7) 6 (81) 0.1 88 (9) 7 79 25 14 39 138 18 (86) (6) (53) 10 (58) 0 6 (52) 0.1 56 (10) 10 47 15 39 54 156 21 (152) (5) (56) (36) (50) 0 5 (45) 0.0 108 (14) 2 93 13 54 67 432 (13) 67 54 (114) 27 54 81 (10) (6) 81 74 136 23 (332) (8) (43) (224) (224) -5 8 (221) 0 441 (10) 112 27 153 (7) (36) 249 (120) 5 7 (108) 0.0 (105) (10) 142 31 (119) (9) (46) (1) (5) 0 9 4 0.0 0 (10)

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

November 9, 2012

Jyoti Structures | 2QFY2013 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets OB/Sales Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis(%) EBIT margin Tax retention ratio (%) Asset turnover (x) RoIC (Pre-tax) RoIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) RoCE (Pre-tax) Angel RoIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover (Gross Block) (X) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to Equity Net debt to EBITDA Interest Coverage
previous year numbers

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 4.2 3.8 0.9 2.1 0.3 3.0 0.9 2.0 10.4 10.4 11.6 0.9 51.3 10.7 63.3 2.9 31.5 19.9 16.2 0.6 22.4 30.2 31.7 22.6 12.1 23 120 91 101 0.7 1.3 2.9 4.3 3.5 0.7 2.3 0.3 2.9 0.8 1.9 10.3 10.3 12.5 1.0 59.8 9.9 61.3 2.8 27.7 17.0 14.3 0.6 18.7 26.1 27.8 18.6 9.8 34 135 111 101 0.6 1.4 2.6 3.6 3.0 0.6 3.4 0.3 2.9 0.7 1.9 12.1 12.1 14.7 1.5 70.1 10.3 63.9 2.6 27.0 17.3 14.4 0.7 19.2 25.4 27.2 18.7 9.1 36 149 113 107 0.7 1.5 2.6 3.9 3.1 0.5 2.3 0.5 4.1 0.7 1.6 11.2 11.2 14.0 1.0 80.3 10.2 68.4 2.0 20.6 14.1 14.1 1.0 14.0 19.6 22.0 14.9 8.8 36 181 117 137 1.3 2.9 1.9 4.7 3.5 0.5 2.3 0.4 3.7 0.7 1.6 9.2 9.2 12.5 1.0 88.2 9.6 67.5 1.7 16.7 11.3 12.8 1.1 9.5 16.0 19.2 10.9 8.1 37 187 110 151 1.0 2.5 1.6 3.7 2.8 0.4 2.3 0.4 3.4 0.6 0.0 11.7 11.7 15.5 1.0 98.7 9.6 67.5 1.9 18.0 12.1 13.2 1.0 11.1 17.2 20.8 12.5 7.8 33 161 89 137 0.9 2.3 1.8

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

November 9, 2012

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Jyoti Structures | 2QFY2013 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Jyoti Structures No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

November 9, 2012

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