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Jaiprakash Associates Limited
Focus on execution;
Deleveraging parent & JP Infra
Our takeaways from the management meeting today at our 15th Annual
India Investor Conference in New Delhi
„Focus on execution & deleveraging parent & JP Infra
JPA set five catalysts for 2011 as start of - 1) Karcham Hydro plant from March’11
and 250MW Bina in 4Q, 2) Yamuna expressway in 3Q2011, 3) 5mtpa AP cement
plant during 2Q, 4) F1 race on Oct 2011 and 5) peaking of capex at JPA/JP Infra.
Engineering & Construction: Steady growth
Expect 10-12%YoY growth in top-line driven by a) start civil works at 2.7GW
Lower Siang hydro project, order for which will be bigger then Karcham & Yamuna
Exp’way put-together, b) build >500mn sq. ft of realty along Yamuna Expressway
and c) US$1bn civil works orders for thermal plants of JP power over FY11-13E.
Power: Vertical scale-up ahead!
„ Expect power capacity to rise 3x to 2.4GW by FY12
„ JP Power has started bidding power from Karcham Wangtoo. It has emerged
L1 for 135MW @ Rs6.05/kWh for 4 peak hours for May’2011.
„ Bina 500MW capacity likely to start by 3/4QFY12. Company has already sold
70% power to MP state – 65% at CERC tariff and 5% at variable cost
„ Financial closure of Lower Siang likely by 2011
„ Equity funding now in-place till June’12 on re-financing of Karcham @80:20
Real Estate and Expressway: Momentum sustained post-IPO
„ JP group has sold 15.4mn sq ft in 9MFY11 (vs 31.4mn sq ft total till FY10) of
which 9.8mn sq ft is sold by JP Infratech and 2.4mn sq ft by JPA. Average
realization till Dec’2010 – JP Infratech +14% v/s FY10
„ The group has already collected advance of Rs75bn (47%) of Rs159bn of
real estate sales till Dec’2010
„ Yamuna expressway is likely to start by 3Q2011.
Cement: Fixed costs to increase as capex peak in 1HFY12
„ Volume growth pick-up in Jan +39%YoY after a weaker 3Q +37%YoY
„ 5mtpa Balaji cement plant likely to start by 1/2QFY12; to hike fixed costs
„ Expect QoQ improvement in EBITDA / tn on rise in cement prices in 4QFY11
Price objective basis & risk
Jaiprakash Associates Limited (JPRKF)
Our PO of Rs200 for JPA is based SOTP valuation. E&C business is valued at
Rs37/share at 6x 1 year forward EBITDA - 50pct discount to target multiples of
E&C majors - BHEL & L&T. JP Greens is valued at Rs5/share based on DCF at
WACC 11.5pct. Expressway business are valued at Rs71/share on DCF
basis/Book Value. Captive coal mines are valued at Rs12/share based on DCF.
Stake of 56.6-100pct in Power projects are valued at 10pct discount to DCF at
Rs65 per share. Cement business is valued at Rs67/share - Cement & captive
power (Parent) FY12E capacity at Rs60/share at US$85/tn - 23% discount to the
industry's current replacement cost of US$110/ton, SAIL Bhillai JV and Bokaro JV
at book value of Rs2/share and Rs1/share respectively and other cement projects
under construction at book value of Rs4/share. Hotel business is valued at 2.5x 1
year forward Sales at Rs3/share. Projects under construction are valued at
Rs5/share at book value. 189mn Treasury stock are valued at Rs16/share - 10%
discount to our SOTP value. Removing net debt of Rs81/share we arrive at an
SOTP value of Rs201 per share. JPA offers a blend of asset play & 18pct CAGR
in parent EPS (FY11-13E). Risks to our PO: a) Political/land acquisition hurdles at
Yamuna Expressway, b) slowdown in hydro power capex, c) demand-supply
imbalance in cement business, d) delay in monetization of assets and e)
hydrology.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaiprakash Associates Limited
Focus on execution;
Deleveraging parent & JP Infra
Our takeaways from the management meeting today at our 15th Annual
India Investor Conference in New Delhi
„Focus on execution & deleveraging parent & JP Infra
JPA set five catalysts for 2011 as start of - 1) Karcham Hydro plant from March’11
and 250MW Bina in 4Q, 2) Yamuna expressway in 3Q2011, 3) 5mtpa AP cement
plant during 2Q, 4) F1 race on Oct 2011 and 5) peaking of capex at JPA/JP Infra.
Engineering & Construction: Steady growth
Expect 10-12%YoY growth in top-line driven by a) start civil works at 2.7GW
Lower Siang hydro project, order for which will be bigger then Karcham & Yamuna
Exp’way put-together, b) build >500mn sq. ft of realty along Yamuna Expressway
and c) US$1bn civil works orders for thermal plants of JP power over FY11-13E.
Power: Vertical scale-up ahead!
„ Expect power capacity to rise 3x to 2.4GW by FY12
„ JP Power has started bidding power from Karcham Wangtoo. It has emerged
L1 for 135MW @ Rs6.05/kWh for 4 peak hours for May’2011.
„ Bina 500MW capacity likely to start by 3/4QFY12. Company has already sold
70% power to MP state – 65% at CERC tariff and 5% at variable cost
„ Financial closure of Lower Siang likely by 2011
„ Equity funding now in-place till June’12 on re-financing of Karcham @80:20
Real Estate and Expressway: Momentum sustained post-IPO
„ JP group has sold 15.4mn sq ft in 9MFY11 (vs 31.4mn sq ft total till FY10) of
which 9.8mn sq ft is sold by JP Infratech and 2.4mn sq ft by JPA. Average
realization till Dec’2010 – JP Infratech +14% v/s FY10
„ The group has already collected advance of Rs75bn (47%) of Rs159bn of
real estate sales till Dec’2010
„ Yamuna expressway is likely to start by 3Q2011.
Cement: Fixed costs to increase as capex peak in 1HFY12
„ Volume growth pick-up in Jan +39%YoY after a weaker 3Q +37%YoY
„ 5mtpa Balaji cement plant likely to start by 1/2QFY12; to hike fixed costs
„ Expect QoQ improvement in EBITDA / tn on rise in cement prices in 4QFY11
Price objective basis & risk
Jaiprakash Associates Limited (JPRKF)
Our PO of Rs200 for JPA is based SOTP valuation. E&C business is valued at
Rs37/share at 6x 1 year forward EBITDA - 50pct discount to target multiples of
E&C majors - BHEL & L&T. JP Greens is valued at Rs5/share based on DCF at
WACC 11.5pct. Expressway business are valued at Rs71/share on DCF
basis/Book Value. Captive coal mines are valued at Rs12/share based on DCF.
Stake of 56.6-100pct in Power projects are valued at 10pct discount to DCF at
Rs65 per share. Cement business is valued at Rs67/share - Cement & captive
power (Parent) FY12E capacity at Rs60/share at US$85/tn - 23% discount to the
industry's current replacement cost of US$110/ton, SAIL Bhillai JV and Bokaro JV
at book value of Rs2/share and Rs1/share respectively and other cement projects
under construction at book value of Rs4/share. Hotel business is valued at 2.5x 1
year forward Sales at Rs3/share. Projects under construction are valued at
Rs5/share at book value. 189mn Treasury stock are valued at Rs16/share - 10%
discount to our SOTP value. Removing net debt of Rs81/share we arrive at an
SOTP value of Rs201 per share. JPA offers a blend of asset play & 18pct CAGR
in parent EPS (FY11-13E). Risks to our PO: a) Political/land acquisition hurdles at
Yamuna Expressway, b) slowdown in hydro power capex, c) demand-supply
imbalance in cement business, d) delay in monetization of assets and e)
hydrology.
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