JAIN IRRIGATION SYSTEMS
Reco price: Rs 841
Current market price: Rs 839
Target price: Rs 986
Upside: 17.5%
Brokerage: Edelweiss Securities
The brokerage believes that India is in dire need of technology to pave the way for agricultural growth. Government expenditure on agricultural subsidies for power and fertilisers has been consistently increasing. Also, yields of major crops in the country vary from 20 per cent to 50 per cent of those in developed countries. Micro irrigation, especially drip irrigation, provides solutions to most of these problems, believes the brokerage.
India is likely to have an additional 15 million hectare of agricultural land to be covered under micro irrigation over the next seven years from the existing 3.68 million hectare, translates into an opportunity of Rs 45,000 crore. Jain Irrigation (JISL) stands to gain the most, being the market leader in this space. Standalone sales of JISL’s micro irrigation systems segment have posted an annual growth of 68 per cent during 2005-09.
The brokerage expects the segment to continue to drive the company’s growth for a few more years, registering a 42 per cent annual growth over 2009-12. On a consolidated basis JISL is likely to post revenue growth of 24 per cent during 2009-12. At the recommended price, the stock is trading at 18.1 times and 13.8 times its PE for FY11E and FY12E, respectively.
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