Buy Jain Irrigation!

"Jain Irrigation Systems Ltd (JISL) is a leading agri business company operating in diverse but integrated segments of agri value chain. It is the second largest manufacturer of micro irrigation systems (MIS) globally and largest in India. JISL is one of the largest manufacturers of the PE pipes and tissue culture banana plants in India. The company also has presence in hybrid and grafted plants, greenhouses, bio fertilizers and solar water heating systems."

Jain Irrigation Systems Ltd (JISL) is a unique company, pioneering micro-irrigation systems (MIS) in India and has diversified into farming. It is into drip irrigation systems, sprinkler irrigation systems, valves, water filters, green houses, bio-fertilisers, onion and vegetable dehydration, PVC pipes & fittings, PVC sheets, polycarbonate sheets and solar water-heating systems. Its foods division is the largest processor of fruits and vegetables in India. It has a huge client base which includes Indian and foreign companies like Aditya Birla, Bharti, Coca-Cola, Hindustan Unilever, Reliance, Heinz, Friesland Foods, Mitsui & Co, Taiyo, etc.
In December 2008, JISL bagged a single order worth Rs27 crore from one of its reputed European customers for dehydration of onions and vegetables. In May 2009, the company bagged an order for Balh Valley Medium Irrigation Project through global competitive bidding from the department of irrigation and public health, Himachal Pradesh. The project is a part of Bhakra Beas Management Board (BBMB), Mandi district (Himachal Pradesh). The total value of the project is Rs65.11 crore. Recently, the company bagged an order for a World Bank project worth Rs77.80 crore for supplying and installing drip and sprinkler irrigation systems in Tamil Nadu covering 22,345 hectares of land benefiting nearly 15,000 farmers. JISL also announced that it has won large orders€”worth Rs158 crore€”from various Coca-Cola bottlers in India and overseas for supply of mango pulp for the 2009-10 season.

In the business of irrigation as well as food processing, JISL faces global competition. It has invested $10 million to set up a new plant in Turkey to make irrigation systems and plastic pipes. It is looking to tap the Asian and Middle East markets for selling processed foods. The overseas ventures are strategic; it is the local market that is really rewarding.

In the September 2009 quarter, the company posted sales growth of 18% and operating profit growth of 70% over the corresponding period last year, due to lower raw material prices. Revenues from the PVC sheets and PVC pipes business declined 29.70% and 5.50%, respectively, while the farm and foods segment reported modest growth of 3.5%. However, the MIS division continued its strong performance by posting a 38% revenue growth. The pipes business grew 14.30% after witnessing a continuous decline in revenue for the past four quarters. The polycarbonate sheet division, which was facing headwinds in the US and EU markets, reported a growth of 11.3%, compared to a flat performance in the June 2009 quarter. Over the past five quarters, the company has maintained an average operating profit margin of 20%. Valuation looks expensive. At the current price of Rs843, its market-cap is 2.90 times its revenues and 13.05 times its operating profit for the September 2009 quarter. But JISL€™s unique business profile and steady growth have always commanded premium valuation.