Current market price: Rs 622
Target Price: Rs 762
Brokerage: Morgan Stanley
Upside: 22%
Strong growth momentum in micro irrigation and fruits and vegetables processing continues to remain the driver for Jain Irrigation. Margins have expanded by 270 basis points in nine months ended December 2007, to 18.6 per cent led by faster growth in mircro irrigation that now comprises 33 per cent of Jain’s revenues (standalone) against 28 per cent in previous corresponding period.
Morgan Stanley believes that micro irrigation and fruits and vegetables will continue to lead revenue growth and higher proportion of micro irrigation business will drive margin expansion. The stock is currently trading at 27 times estimated FY09 earnings and 20 times estimated FY10 earnings. The brokerage rates the industry as “attractive”, and the stock “overweight”, with a target price of Rs 762.
