Jain Irrigation Systems Limited (JISL) is a leading agri-business multinational organization based in Jalgaon, Maharashtra.

Jain Irrigation Systems Limited (JISL) is a leading agri-business multinational organization based in Jalgaon, Maharashtra. JISL manufactures a wide range of products, which include irrigation systems, piping systems, plastic sheets, bio-fertilizers, solar water heating systems and photovoltaic appliances. JISL is also present in the food processing industry. JISL has 10 plants in India and 13 plants strategically located abroad. JISL has a 55 percent market share of the domestic micro irrigation market through its extensive dealer network of 1,500. outlets. Globally JISL commands a 20 percent market share of the MI segment
Dominant player in micro-irrigation (MI): JISL has a 55 per cent market share of the domestic micro irrigation market through its extensive dealer network of 1,500 outlets. Globally, JISL commands a 20 per cent market share of the MI segment. Out of 70 mha (million hectares) under irrigation in India, it is estimated that only 2 mha is under micro-irrigation. A Government appointed task force has proposed to bring 14 mha under micro-irrigation during the Eleventh five year plan (2007-2012), at an estimated cost of Rs.2.1 lac cr and a subsidy plan under which 50 per cent of the equipment cost would be funded by the government and the balance by the farmer. Over the years, most of the states have increased the subsidy to 70-75 per cent. Government’s focus, coupled with increased subsidy, will drive the growth for MI and SI segment, on a medium to longer term horizon. Taking into consideration all these factors, the MI/SI segments provides strong visibility for growth. Piping business to benefit from infrastructure investments: A large part of the piping industry is unorganized, being small and medium scale in nature. However, there are few major players in the organized sector and JISL is one of these players, with a 15 per cent market share in PVC pipe segment and 35 per cent market share in the PE pipe segment. JISL has a pipe manufacturing facility of 1,15,000 MT, making it the largest pipe manufacture, by capacity. The company manufactures a wide variety of pipes ranging from diameter 0.5” to 22” pipes. These pipes are used in water and gas distribution, sewage networks, telecommunication and construction, among others.
Government investment in water distribution systems, sewage systems, urban infrastructure and gas distribution systems will continue to drive momentum in the piping segment.Government investment in water distribution systems, sewage systems, urban infrastructure and gas distribution systems will continue to drive momentum in the piping segment. Currently, only few cities are covered under the city gas distribution and the volatility in oil prices have prompted expansion of the city gas distribution network across cities. This expansion is likely to result in a significant demand for pipes over the next few years. Some of JISL’s esteemed clients in this segment include Gujarat Gas Company and Indraprastha Gas Ltd (IGL), among others. Finance Budget expected in February, 2010: The Finance Budget 2010 expected in the last week of February, 2010 could highlight some of the subsidies and benefits that the government intends to give to the agricultural sector. In the Finance Budget 2009, the food and fertilizer subsidy was over Rs.1,200 billion. In addition, the government, in order to build the required infrastructure to bring more land under irrigation, has allocated Rs.1,00,000 capex for every hectare of land. Some positive announcements are expected with respect to the agricultural sector, by the government, in the forthcoming Budget, which in turn could be positive for companies like JISL. Financials and Valuations: At the present market price of Rs.836, the stock is trading at 28.38x its FY’10E earnings and 20.95x its FY’11E earnings. For H1FY’10 the net sales stood at Rs.1116.74 cr compared to Rs.933.85 cr for H1FY’09, an increase of 19.6%. PAT for H1FY’10 was Rs.98.17 cr compared to Rs.54.06 cr for H1FY’09. On the back of government’s thrust on irrigation and infrastructure development, revenues are expected to grow at more than 15 percent Y-o-Y for the next two years atleast, on a conservative basis. JISL has evolved from being a pure irrigation player, to a water solution provider, food processor and a building material provider through both, organic and inorganic routes and in the last couple of years the company has made quite a few acquisitions. Taking into consideration that the Finance Budget 2010, to be announced in the last week of February 2010, is expected to have some positive announcements for the agricultural sector, we recommend a “BUY” with a price target of Rs.965 over the next six months.