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Jaiprakash Associates Limited
Strong Realty offset by weak
Cement and E&C: PO cut
Weak 4Q – Cut EPS and PO to Rs170, but reiterate Buy
JPA (parent) had weak 4Q with Rec PAT -27%YoY. But consolidated results,
likely next month, is a better way to analyze this developer, in our view. Realty was
strong in 4Q – revenues +380%YoY, EBIT +635% – on high-margin JP Green,
Noida and Greater Noida sales and Rs866mn dividend from JP Infra. But this was
offset by a 2%YoY fall in cement ASP and weak E&C execution/margins. We are
cutting FY12-13E parent EPS by 12-18% to reflect weak 4Q margins and higher
interest costs. Our PO is down to Rs170 from Rs200 due to lower parent EPS and
a 12% cut in our PO for JP Power. Catalysts are start of – 1) Karcham HEP May-
Aug.’11, 2) Yamuna expressway in 4Q, and 3) Capex peak at parent & JP Infra in
FY11 leading to deleveraging from FY12. Buy JPA on assets trading at 49%
discount to NAV, which could be unlocked by improving visibility of cash flow.
Realty surprise, but Cement and E&C disappoint
JPA’s 4Q11 EBITDA fell 6%YoY on a 511bp fall in margins due to weak Cement
and E&C (EBIT margin -797bp). Sales rose 17%YoY (4% below BofAMLe) on
strong realty +380%YoY, but offset by 11%YoY fall in E&C sales on slow progress
at expressway and AP tunnel site. Cement sales +27%YoY but EBIT fell 26%YoY
on 2% fall in cement ASP and start-up costs of 4.4mtpa (21% of capacity).
Captive orders to support E&C; Cement capacity +64% by FY13
Growth in top-line of E&C led by a) start of civil works at 2.7GW Lower Siang HEP in
FY12, order value of which shall 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. JPA to
ramp-up cement capacity to 37mtpa +64% by FY13E vs 22.8mtpa till 3QFY11.
Buy – Assets at a 49% discount, 32% EPS CAGR in FY11-13E
JPA is one of the best asset plays (49% disc to NAV). Triggers: a) Timely start of
projects (esp. Karcham), BTG order for 2GW Bara Ph 2, b) monetization of realty,
c) bottoming of cement prices in 2HFY12 and d) approval for Gr. Noida airport.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaiprakash Associates Limited
Strong Realty offset by weak
Cement and E&C: PO cut
Weak 4Q – Cut EPS and PO to Rs170, but reiterate Buy
JPA (parent) had weak 4Q with Rec PAT -27%YoY. But consolidated results,
likely next month, is a better way to analyze this developer, in our view. Realty was
strong in 4Q – revenues +380%YoY, EBIT +635% – on high-margin JP Green,
Noida and Greater Noida sales and Rs866mn dividend from JP Infra. But this was
offset by a 2%YoY fall in cement ASP and weak E&C execution/margins. We are
cutting FY12-13E parent EPS by 12-18% to reflect weak 4Q margins and higher
interest costs. Our PO is down to Rs170 from Rs200 due to lower parent EPS and
a 12% cut in our PO for JP Power. Catalysts are start of – 1) Karcham HEP May-
Aug.’11, 2) Yamuna expressway in 4Q, and 3) Capex peak at parent & JP Infra in
FY11 leading to deleveraging from FY12. Buy JPA on assets trading at 49%
discount to NAV, which could be unlocked by improving visibility of cash flow.
Realty surprise, but Cement and E&C disappoint
JPA’s 4Q11 EBITDA fell 6%YoY on a 511bp fall in margins due to weak Cement
and E&C (EBIT margin -797bp). Sales rose 17%YoY (4% below BofAMLe) on
strong realty +380%YoY, but offset by 11%YoY fall in E&C sales on slow progress
at expressway and AP tunnel site. Cement sales +27%YoY but EBIT fell 26%YoY
on 2% fall in cement ASP and start-up costs of 4.4mtpa (21% of capacity).
Captive orders to support E&C; Cement capacity +64% by FY13
Growth in top-line of E&C led by a) start of civil works at 2.7GW Lower Siang HEP in
FY12, order value of which shall 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. JPA to
ramp-up cement capacity to 37mtpa +64% by FY13E vs 22.8mtpa till 3QFY11.
Buy – Assets at a 49% discount, 32% EPS CAGR in FY11-13E
JPA is one of the best asset plays (49% disc to NAV). Triggers: a) Timely start of
projects (esp. Karcham), BTG order for 2GW Bara Ph 2, b) monetization of realty,
c) bottoming of cement prices in 2HFY12 and d) approval for Gr. Noida airport.
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