Jaypee Infratech- Excess supply in Noida; downgrade to Underperform 􀂄 BofA Merrill Lynch,

Please Share::  India Equity Research Reports, IPO and Stock News

Visit http://indiaer.blogspot.com/ for complete details �� ��

J aypee Infratech
Excess supply in Noida;
downgrade to Underperform
􀂄 PO lowered to Rs44; expressway unlikely to be key driver
We downgrade Jaypee Infratech (JIL)’s rating to Underperform with a reduced PO
of Rs44 (cut from Rs65). Our PO, which factors in sluggish volume and prices in
Noida over the next couple of years due to oversupply, is based on a 25% (15%
earlier) discount to our NAV of Rs62. We believe the best of real estate operations
for JIL is behind us and volumes and cash flows will largely disappoint the market
from here on, while expressway is unlikely to be the key driver.
Oversupply in Noida: Key concern
We have lowered our NAV estimate primarily to factor in lower volume and prices
in Noida and Greater Noida regions due to massive oversupply. We expect the
supply surge seen from 2009 will take at least 2-3 years to even out. We expect
this will lead to a slowdown in sales for JIL in its Noida project over the next
several quarters. Also, other land parcels (outskirts of Noida) will continue to see
lukewarm response given the oversupply and subdued prices in Noida itself.
Unexciting earnings on slow volume and execution delays
We have cut our earnings estimate for FY13/14 by 15% and 32% to factor in
lower volume and prices in Noida leading to flat earnings for next two years. Also,
on execution front, we believe JIL is lagging by 9-12 months and our estimate
suggests over 66% of the expected cash flows from pre-sold projects will be
utilized for construction, leaving aside limited surplus for debt repayment.
Expressway nearing completion but no upside in sight
The expressway is in its last stage of construction and should be completed in the
next six months, but it will likely not lead to stock’s rerating. Toll collection in the
initial 2-3 years will be subdued, while JIL may face opposition in making Noida-
Greater Noida Expressway, which contributes 20% of expressway valuation, a toll

For complete sector report and details on other companies click link below

Real Estate/Property - India Fallen Angels: bottom fish selectively �� BofA Merrill Lynch