Jaiprakash Associates - Construction margins ahead than estimates:: Prabhudas Lilladher,

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􀂄 Flat Revenue growth: Construction revenues (constituting 40% of the total
revenues) de-grew by 11.3% YoY for Q1FY11; however, cement sales were up by
12.9% YoY. This was mainly on account of a 20% growth in despatches YoY to
4.2m tonnes. Realisations were a tad lower at Rs3,800/tonne down by 5.4% YoY
and up by 14.8% QoQ.
􀂄 Real Estate, EPC aids EBITDA, while Cement EBIT margins suffer: EBIT margins
for construction which disappointed in Q4FY11 and which were lower in Q1FY11
rose to 19.6% in Q1FY12. This was above our expectation of 6% as we had
considered in house construction to have higher share in revenue booking. For
cement, the EBIT per tonne declined to Rs464/tonne from Rs482/tonne in
Q4FY12 and Rs818/tonne in Q1FY11. EBIT margin for cement stood at 11.9%
which was in line our expectation of 12% lower by 800bps YoY. Real Estate EBIT
margins were the surprise factor with a 1100bps improvement YoY which aided
the overall results. Overall EBIDTA margins stood at 23.4% which was up by
317bps YoY on back of better EPC and Real Estate margins.
􀂄 Higher interest continues to dent PAT: Interest continues to increase YoY by
30.6% and QoQ by 5% to Rs4.3bn. Tax rate was also higher to 40% as compared
to 28% YoY which led to a APAT growth of 1% YoY. However the profits were
higher than our expectations of Rs791m.
􀂄 Valuations: Triggers in terms of commissioning of YEW, increased land sales in
JPI and pick-up in construction revenues in JPA fares well for upsides in the
stock, going forward. The stock is available at a core P/E of 7.7x FY13E. Maintain
‘Accumulate’