UBS :: Jaiprakash Associates - Below estimates due to E&C margins; s trong execution across segments

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UBS Investment Research
Jaiprakash Associates Limited
Below estimates due to E&C margins;
s trong execution across segments
􀂄 Pre-ex PAT up 12% YoY, below our estimates, in-line with consensus
JAL reported Q4 FY11 revenues of Rs39.8bn (+12% y/y, UBs-e Rs33.6bn,
consensus estimate Rs35.3bn), and pre-ex PAT of Rs2.9bn (+12% y/y; UBS-e
Rs3.3bn, consensus estimate Rs2.8bn). Execution has remained robust across all
segments with segmental revenues being higher than our estimates. In FY11,
revenues at Rs132bn increased 28% y/y and pre-ex PAT at Rs6.5bn declined 8%
y/y, primarily due to 32% rise in interest costs.
􀂄 Construction margin disappoints; Real estate revenues surprise.
Construction revenues were at Rs23.8bn (+3% y/y), while EBIT margins were at
12.3% (significantly below UBS-e of 17.2%). Lower E&C margins are the prime
reason for the miss in estimates. We need to get details from the company
regarding exceptionals, if any. Real estate revenues were at Rs6bn (+380% y/y,
UBS-e Rs4.6n) with EBIT margins of 48%.
􀂄 Cement business performance in line with UBS-e
In Q4 FY11, revenues from cement segment increased 27% y/y to Rs15.7bn, EBIT
declined 26% y/y to Rs2.2bn, while EBIT margin stood at 14.2% (UBS-e 13.3%).
Cement volume details are awaited (likewise the consolidated results of JAL are
not yet available).
􀂄 Valuation: Buy rating with sum-of-the-parts-based PT of Rs115
We maintain our Buy rating given attractive valuations and strong earnings growth