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Jaiprakash Associates (JPA)
Others
Real estate shines. Jaiprakash Associates reported better-than-estimated results, with
the real estate segment compensating for weak realizations in the cement business and
moderation of construction revenues. The cement segment reported 31% yoy growth
in volumes, well ahead of the industry growth rate of 5.5%. We remain optimistic
about the growth prospects of JAL given the pace of execution across business
segments and reiterate our BUY rating with a revised target price of Rs135/share.
Results beat estimates as real estate delivers strong growth
JAL reported revenues of Rs28.9 bn (1% yoy, -3% qoq), operating profits of Rs7.9 bn (2% yoy,
16% qoq) and net income of Rs2.3 bn (-26% yoy, 107% qoq) for 3QFY11 against our estimate of
Rs30.4 bn, Rs6.3 bn and Rs1.4 bn, respectively. Lower-than-estimated revenues were on account
of lower construction revenues of Rs12.6 bn against our estimates of Rs16.3 bn, which was partly
compensated for by strong real estate revenues. Contribution of from the high-margin real estate
business led to outperformance at the operating level. Construction margins remained stable at
21% while cement EBIT margins contracted by 409 bps due to continued weakness in cement
prices in key markets. We discuss in detail the individual performances of each of the segments of
JAL along with its real estate and power subsidiaries.
Strong traction on Noida real estate development, commanding premium pricing
JAL’s standalone real estate portfolio comprise ~8 mn sq. ft of development in Jaypee Greens,
Greater Noida and ~24 mn sq. ft of development in Noida (part of Jaypee Infratech Noida land
parcel which was sold to JAL in FY2010). Strong real estate revenues were likely driven by robust
sales and pick up in construction activity at its Noida development. We highlight that JAL had sold
~6 mn sq. ft from its Noida development as of September 2010, aggregating a total sales value of
Rs33.8 bn—implying an average realization of Rs5,637/sq .ft (84% premium to average realization
of JIL at the same location).
Commissioning of Karcham Wangtoo could surprise significantly
Management has indicated that the first unit of JPVL’s Karcham Wangtoo hydro project (1,000
MW) will likely commission ahead of schedule in March 2011, in time to enable generation in the
monsoon season. We currently factor Karcham Wangtoo to contribute to earnings only from the
ensuing monsoon season, hence ahead of schedule commissioning could provide significant
upside to our FY2012E earnings estimate (add ~Rs0.5/share to our FY2012E EPS). Along with
Karcham Wangtoo, the commissioning of other thermal projects such as Bina (FY2013E), Bara
(FY2014E) and Jaypee Nigrie (FY2014E) will drive ~51% CAGR in JPVL net income in FY2010-14E
period.
Maintain BUY rating with revised target price of Rs135/share
We maintain our BUY rating with a revised target price of Rs135/share as we adjust for
(1) continued weakness in cement realization and (2) moderated pace of execution in the
construction division. Our SOTP-based target price includes Rs54/share for the standalone
business which includes (1) cement business at Rs50/share valued at 6X EV/EBITDA,
(2) construction business at Rs36/share valued at 6X EV/EBITDA, (3) the real estate
business at Rs12/share which includes Jaypee Green, Greater Noida and Noida and
(4) investment ins subsidiaries at book value at Rs5/share.We note that the standalone
entity has a net debt of Rs49/share.
We ascribe Rs28/share for 83% stake in JIL and Rs43/share for power business. We have
revised our EPS estimate to Rs5.3/share (Rs4.6 previously) in FY2011E and Rs5.9/share
(Rs6.5 previously) in FY2012E, to factor (1) improved real estate revenue in both
standalone business and JIL, (2) lower volumes and profitability in the cement business.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaiprakash Associates (JPA)
Others
Real estate shines. Jaiprakash Associates reported better-than-estimated results, with
the real estate segment compensating for weak realizations in the cement business and
moderation of construction revenues. The cement segment reported 31% yoy growth
in volumes, well ahead of the industry growth rate of 5.5%. We remain optimistic
about the growth prospects of JAL given the pace of execution across business
segments and reiterate our BUY rating with a revised target price of Rs135/share.
Results beat estimates as real estate delivers strong growth
JAL reported revenues of Rs28.9 bn (1% yoy, -3% qoq), operating profits of Rs7.9 bn (2% yoy,
16% qoq) and net income of Rs2.3 bn (-26% yoy, 107% qoq) for 3QFY11 against our estimate of
Rs30.4 bn, Rs6.3 bn and Rs1.4 bn, respectively. Lower-than-estimated revenues were on account
of lower construction revenues of Rs12.6 bn against our estimates of Rs16.3 bn, which was partly
compensated for by strong real estate revenues. Contribution of from the high-margin real estate
business led to outperformance at the operating level. Construction margins remained stable at
21% while cement EBIT margins contracted by 409 bps due to continued weakness in cement
prices in key markets. We discuss in detail the individual performances of each of the segments of
JAL along with its real estate and power subsidiaries.
Strong traction on Noida real estate development, commanding premium pricing
JAL’s standalone real estate portfolio comprise ~8 mn sq. ft of development in Jaypee Greens,
Greater Noida and ~24 mn sq. ft of development in Noida (part of Jaypee Infratech Noida land
parcel which was sold to JAL in FY2010). Strong real estate revenues were likely driven by robust
sales and pick up in construction activity at its Noida development. We highlight that JAL had sold
~6 mn sq. ft from its Noida development as of September 2010, aggregating a total sales value of
Rs33.8 bn—implying an average realization of Rs5,637/sq .ft (84% premium to average realization
of JIL at the same location).
Commissioning of Karcham Wangtoo could surprise significantly
Management has indicated that the first unit of JPVL’s Karcham Wangtoo hydro project (1,000
MW) will likely commission ahead of schedule in March 2011, in time to enable generation in the
monsoon season. We currently factor Karcham Wangtoo to contribute to earnings only from the
ensuing monsoon season, hence ahead of schedule commissioning could provide significant
upside to our FY2012E earnings estimate (add ~Rs0.5/share to our FY2012E EPS). Along with
Karcham Wangtoo, the commissioning of other thermal projects such as Bina (FY2013E), Bara
(FY2014E) and Jaypee Nigrie (FY2014E) will drive ~51% CAGR in JPVL net income in FY2010-14E
period.
Maintain BUY rating with revised target price of Rs135/share
We maintain our BUY rating with a revised target price of Rs135/share as we adjust for
(1) continued weakness in cement realization and (2) moderated pace of execution in the
construction division. Our SOTP-based target price includes Rs54/share for the standalone
business which includes (1) cement business at Rs50/share valued at 6X EV/EBITDA,
(2) construction business at Rs36/share valued at 6X EV/EBITDA, (3) the real estate
business at Rs12/share which includes Jaypee Green, Greater Noida and Noida and
(4) investment ins subsidiaries at book value at Rs5/share.We note that the standalone
entity has a net debt of Rs49/share.
We ascribe Rs28/share for 83% stake in JIL and Rs43/share for power business. We have
revised our EPS estimate to Rs5.3/share (Rs4.6 previously) in FY2011E and Rs5.9/share
(Rs6.5 previously) in FY2012E, to factor (1) improved real estate revenue in both
standalone business and JIL, (2) lower volumes and profitability in the cement business.
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