Jiya Eco Products Limited Initiating Coverage Research Report By Khambatta Securities

Capacity expansion and installation of burners will drive growth

Initiation Report

INVESTMENT SUMMARY

Gujarat-based Jiya Eco Products Limited (JEPL) manufactures bio briquettes, bio pellets and processed agro waste. Biomass pellets and briquettes are made from agricultural, forest and other bio wastes. With abundant availability of waste, biomass presents a sustainable economic opportunity across the value chain.

Demand for biomass fuel will increase going forward, driven by its lower cost, high energy content, concern for the environment, and emerging opportunities such as biomass co-firing at thermal power plants.

JEPL’s greenfield project in Gandhidham with a capacity of 1,80,000 MTPA is expected to come on stream in 1Q FY20. The new capacity will primarily target the higher margin retail market, leading to margin-accretive growth. A greater share of retail sales will also ease up working capital requirement.

The addition of processed agro waste to the product portfolio has opened up a new revenue stream. Further, the company’s plan to install more burners at customer sites will create a secure captive revenue stream. While JEPL currently sells only within India, global opportunities and proximity of plants to major ports present future scope for exports.

We expect healthy topline growth to be driven by capacity expansion, faster growth in retail sales and installation of more burners. Easy raw material availability and operating leverage will enable expansion of EBITDA margins. At current levels, the JEPL stock looks attractively priced at 5.6x FY21E EPS. Our SOTP valuation generates a price target of Rs 109 with a potential upside of 90% and informing a BUY rating.