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Jaiprakash Associates Limited
Robust outlook reinforced at
1st analyst meet
Focus on execution & deleveraging – noting new; Buy
Mr. Manoj Gaur, Chairman, set four catalysts for 2011 as start of – 1) Karcham
Hydro plant from March’11, 2) Yamuna expressway in July‘11, 3) 3.5mtpa cement
plant in South & 4) F1 race on Oct 3’ 2011. Mgt. reiterated growth across verticals
over FY10-13E - power to 2.4GW +3.4x (see pg 3-4), realty delivery to 41mn sqft
(see pg 6) and cement capacity to 37mtpa (+64%), while deleveraging parent and
JP Infra. Buy JPA on Infra assets trading at 31% discount to NAV.
Mgt. Address Key concern:
Negative growth in E&C from FY12: Mgt expects growth in topline of E&C
led by a) start of civil works at 2.7GW Lower Siang HEP from 1QFY12, order
value of which will be bigger then Karcham Wangtoo & Yamuna Expressway
put-together, b) build >500mn sqft of realty along Yamuna Expressway and c)
US$1bn civil works at thermal plants of JP power over FY11-13E.
200MW captive power: Mgt. expects ~200MW of surplus of 360MW captive
power being set-up at Churk & Siddhi. It aims to sell on 1) merchant basis to
its realty customers @ JP Greens and 2) use it in fertilizer plant.
Funding gap @JP power: Mgt expects new equity raising of US$500mn by
FY12E, which should not be difficult given its most compelling IPP pipeline.
Leveraged parent & JP Infra B/S: JP expects deleveraging from FY12E on
peaked cement capex (Rs35bn) in FY11-12E and better capacity utilization.
Weak Cement profits: JP confirmed that ASP is up Rs300/tn v/s 2Q and
expects its EBITDA/tn to remain in top quartile of the sector led by well
planned capex in central India, tax incentives, captive coal mine & power.
Ganga Expressway: Unlikely to make any material investments till FY13
Buy value assets 31% discount & 21% EPS CAGR in FY10-12E
JPA offers a blend of asset play (31% disc to NAV) & 21% CAGR in parent EPS
(FY10-12E). Triggers are a) timely execution of projects (esp. Karcham),
equipment order for 2GW Karchana project, b) monetization of realty land bank, c)
bottom-out of cement prices in 2HFY11 & d) approval for Gr. NOIDA airport.
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