Jaypee Infratech: Strong 2Q, execution on track -Buy :: BofA ML

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Jaypee Infratech
Strong 2Q, execution on track
- Reiterate Buy
􀂄 Strong results, Reiterate Buy
Jaypee Infratech reported strong 2Q results with earnings at Rs4.1bn, double our
estimate. JIL has recognized most of the revenues from the plotted sales in
1HFY11 against our estimation of 12-18months leading to the outperformance.
We have adjusted our FY11 (increased by 17%) and FY12 estimates to factor in
full recognition of plotted sales this fiscal. We reiterate our Buy rating with
potential upside of 16%. The launch of 2nd parcel in NCR and approval for airport
on the expressway should be key triggers for the stock in the next 6 months.
Expressway execution spot on
The execution for the expressway is on track and management reiterated its
guidance of completing the project by FY11. We currently built in toll revenues
from Dec 2011 and see upside risk to our estimate. The execution did get
impacted during the recent agitation by farmers, but now the work is back on full
swing. In 2Q alone JPI has spent incremental capex of Rs12bn on expressway,
with final surface laying completed for 44% of the road up from 38% in 1Q.
Noida sales strong, launch on parcel 2 is the key
The sales continue to be strong in Noida project with pre sales of 6.7mn sq ft in
1HFY11 with ASP of Rs3361/sq ft in line to meet our estimate of 15mn sq ft. JIL is
planning to launch the residential project at 2nd parcel in 3Q. The good response
for the project will be a key for the stock as the parcel contributes 25% to our NAV
and will improve cash flow visibility beyond Noida project.
Noida resi prices – scope for upside
We believe the residential prices in Noida have a strong case to outperform
Gurgaon in next 12-18months as currently Noida residential prices are at 25-40%
discount to Gurgaon. While Gurgaon has seen price increases of 30-35% in last
12 months, Noida has been more stable moving up by just 10-15%.