Looking ahead, we expect JKT may face challenging environment in the near-term, while its performance is expected to improve from 2HFY20 onwards owing to sustained growth in sales volume, reduction in manpower cost and better cost control. At CMP, the stock trades at a lower multiple vis-à-vis its peers mainly due to high debt. However, we expect a likely pick-up in utilisation and moderate capex requirement to aid JKT to de-leverage its balance-sheet over the next 3-5 years. Factoring in ongoing slowdown and margin pressure, we lower our EPS estimates by 15% each for FY20E/FY21E (Factoring 7% earnings cut and ~8% equity dilution). Post recent correction, the stock trades at attractive valuation of 5.4x FY21E EPS. Maintaining our valuation multiples for FY21E, we reiterate our BUY recommendation on the stock with a revised Target Price of Rs115 (Rs.135 earlier), valuing the stock at 8xFY21E EPS.
We expect sales and PAT to grow at a CAGR of 10.7% and 34.2%, respectively, in FY19-21E. JKTIL is expected to benefit from balance sheet de-leveraging amid steady replacement demand and stable raw material prices. We value JKTIL at Rs 100 i.e. 5.5x EV/EBITDA (FY21E) and assign BUY rating. RoE profile at JKTIL is also expected to improve to 13% by FY21E.