HDFC Sec - Jain Irrigation

HDFC Securities report on Jain Irrigation:

Continuing its acquisitions in the MIRS space, Jain Irrigation’s acquisition of NaanDan makes it the second largest player, next to Netafim of Israel ($325 mn revenue size). NaanDan gives Jain access to 50 countries in Europe and Latin America, apart from the US, Australia and Israel.

The PVC and PE pipes segments are both growing by 10-12%. With Reliance & GAIL as possible clients in the PE pipes segment, JISL is set to show consistent growth. The EBDITA margin is 6-8% in PVC pipes and 12-14% in PE pipes.

PVC Sheets: This segment has been growing 30% for the past 3 years and is expected to grow at 10%-14% in the next 2 years. The EBDITA margin is 18% in this segment.

Jain’s MIRS/SIS business is expected to grow by 70% next year and Pipes and sheets together are expected to grow by 30%. Hence overall, the company is expected to grow by 40% in the next 18 months. The fair price of the Equity Portion of the company comes to Rs533 per share, which discounts its FY08E EPS 23.2 times and FY09E EPS 16.9 times. The upside potential for the stock is 8.5% from the current levels.