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Disappointing results…
Jaiprakash Associates (JAL)’s Q3FY11 results were well below our
expectation due to disappointing performance from the construction
segment led by slower execution at Yamuna Expressway due to
agitation. We highlight that JAL’s construction business continues to
remain volatile and now its net current order book also stands at | 5000
crore. We have now valued JAL at | 90/share based on the SOTP
valuation methodology and recommend an ADD rating.
ƒ Q3FY11 results below our expectation
JAL’s revenues grew 1.4% YoY to | 2893.7 crore mainly on account of
disappointment on construction segment revenues. The construction
division revenues declined 23.1% YoY to | 1263.9 crore due to agitation
at the Yamuna Expressway while cement division revenues grew 30.5%
YoY to | 1237.4 crore (volume including clinker grew 37% YoY to 3.9
MTPA). The real estate division also reported a good show with topline
growth of 31.6% YoY and EBIT margin of 69% in Q2FY11.
ƒ Construction business continues to remain volatile
Construction division revenues declined 23.1% YoY in Q2FY11 due to
agitation at Yamuna Expressway. We highlight that JAL’s construction
continues to remain volatile for the past few quarters. Furthermore, its
current net construction order book has come down to | 5000 crore
(excluding Ganga Expressway).
Valuation
We have lowered our earning estimates by ~20-25% for FY11 and FY12
in order to reflect slower revenues in the construction business and
lower realisation in the cement division. At the CMP, the stock is
trading at 19.7x FY12 earning estimates and 1.7x FY12 P/BV. We have
now valued the stock at | 90/share based on the SOTP valuation
methodology. We have valued the cement business at | 50/share (6x
FY12 EV/EBITDA), construction business at | 37/share (6x FY12
EV/EBITDA), power business at | 34/share (largely JPVL at 20%
discount to CMP), real estate business at |34/share (Jaypee Infratech at
a 20% discount to the CMP).
Result Analysis
• JAL reported flattish YoY revenue growth of 1.4% mainly on account
of disappointment on the construction segment topline. Construction
division revenues saw a decline of 23.1% YoY to | 1263.9 crore while
cement division revenues grew 30.5% YoY to | 1237.4 crore
(volumes grew 37% YoY to 3.9 MTPA but realisation declined 4.7%
YoY and 7% sequentially to | 3155 per tonne). In terms of other
division, real estate revenues grew 23% YoY to | 425.5 crore
• OPM also remain flattish YoY at 27.4%. While construction and
cement division EBIT margins declined 3.6 and 13.4 percentage
points (pps) YoY to 21.4% and 11.5%, respectively, real estate EBIT
margins saw handsome growth of 26.6 pps YoY to 69.1%
• The adjusted PAT declined 25.6% YoY to | 232.7 crore (lower than
our estimate of | 296.7 crore) mainly on account of lower than
expected revenues in the construction division and lower than
expected EBIT margins in the cement division
• The company has also indicated the early completion of the Karcham
Wangtoo Project ahead of its scheduled completion date leading to its
early commissioning
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Disappointing results…
Jaiprakash Associates (JAL)’s Q3FY11 results were well below our
expectation due to disappointing performance from the construction
segment led by slower execution at Yamuna Expressway due to
agitation. We highlight that JAL’s construction business continues to
remain volatile and now its net current order book also stands at | 5000
crore. We have now valued JAL at | 90/share based on the SOTP
valuation methodology and recommend an ADD rating.
ƒ Q3FY11 results below our expectation
JAL’s revenues grew 1.4% YoY to | 2893.7 crore mainly on account of
disappointment on construction segment revenues. The construction
division revenues declined 23.1% YoY to | 1263.9 crore due to agitation
at the Yamuna Expressway while cement division revenues grew 30.5%
YoY to | 1237.4 crore (volume including clinker grew 37% YoY to 3.9
MTPA). The real estate division also reported a good show with topline
growth of 31.6% YoY and EBIT margin of 69% in Q2FY11.
ƒ Construction business continues to remain volatile
Construction division revenues declined 23.1% YoY in Q2FY11 due to
agitation at Yamuna Expressway. We highlight that JAL’s construction
continues to remain volatile for the past few quarters. Furthermore, its
current net construction order book has come down to | 5000 crore
(excluding Ganga Expressway).
Valuation
We have lowered our earning estimates by ~20-25% for FY11 and FY12
in order to reflect slower revenues in the construction business and
lower realisation in the cement division. At the CMP, the stock is
trading at 19.7x FY12 earning estimates and 1.7x FY12 P/BV. We have
now valued the stock at | 90/share based on the SOTP valuation
methodology. We have valued the cement business at | 50/share (6x
FY12 EV/EBITDA), construction business at | 37/share (6x FY12
EV/EBITDA), power business at | 34/share (largely JPVL at 20%
discount to CMP), real estate business at |34/share (Jaypee Infratech at
a 20% discount to the CMP).
Result Analysis
• JAL reported flattish YoY revenue growth of 1.4% mainly on account
of disappointment on the construction segment topline. Construction
division revenues saw a decline of 23.1% YoY to | 1263.9 crore while
cement division revenues grew 30.5% YoY to | 1237.4 crore
(volumes grew 37% YoY to 3.9 MTPA but realisation declined 4.7%
YoY and 7% sequentially to | 3155 per tonne). In terms of other
division, real estate revenues grew 23% YoY to | 425.5 crore
• OPM also remain flattish YoY at 27.4%. While construction and
cement division EBIT margins declined 3.6 and 13.4 percentage
points (pps) YoY to 21.4% and 11.5%, respectively, real estate EBIT
margins saw handsome growth of 26.6 pps YoY to 69.1%
• The adjusted PAT declined 25.6% YoY to | 232.7 crore (lower than
our estimate of | 296.7 crore) mainly on account of lower than
expected revenues in the construction division and lower than
expected EBIT margins in the cement division
• The company has also indicated the early completion of the Karcham
Wangtoo Project ahead of its scheduled completion date leading to its
early commissioning
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