Jyoti Structures Limited (JSL), incorporated in 1974, is among the top three players in the Transmission Engineering Procurement Construction (EPC) space in the country.
The company provides complete turnkey solutions that involve the setting up of both transmission lines (up to 800KV) and of substations (up to 400KV).
The government has envisaged an investment of Rs140,000 crore in the Transmission segment for the Eleventh Five-Year Plan, which is an increase of over two times from the investments made in the Tenth Plan period. The scale gets even bigger for the Twelfth Five-Year Plan, with a planned investment of around Rs240,000 crore.
As per our estimates, this has opened up a potential $14-15 billion of opportunity for Transmission EPC players during the Eleventh Plan period alone.
We believe that JSL, being among the top three players in this space, would continue to be a key beneficiary of the power sector boom in India. During FY2009-11E, we expect the company to register a Top-line and a Bottom-line CAGR of 23.1% and 26.8%, respectively.
At the current price of Rs156, the stock is quoting at 12.7x and at 10.0x its FY2010E and FY2011E EPS, respectively, which we believe is attractive.
We initiate coverage on the stock, with a BUY recommendation and a target price of Rs204.