Asset monetisation need of the hour!!!
JAL’s reported net profit in Q1FY14 was above our expectations on
account of one-time profit of | 395.3 crore (pre-tax) from sale of shares of
Jaypee Infratech during the quarter. However, the net profit after
adjusting for profit on sale works out to | 24.8 crore (decline of 82% YoY).
In the cement division, volumes grew 3.1% YoY to 3.7 MT while the
realisation improved by | 90/tonne at | 4160/tonne and the EBITDA
declined by | 55/tonne to | 884/tonne in Q1FY14. Going ahead, with the
interest coverage ratio (0.9x in Q1FY14) – lowest in the last seven years,
de-leveraging of balance sheet through asset monetisation is the need of
the hour and would act as a key catalyst for the stock performance.
Disappointing Q1FY14 results…
JAL’s adjusted net profit declined 82% YoY to | 24.8 crore due to lower
margins (22.9% in Q1FY14 vs. 26% in Q1FY13), and higher interest and
depreciation cost (grew 26.8% and 10.2% YoY to | 590 crore and | 194.3
crore, respectively). The standalone cement division volumes grew 3.1%
YoY to 3.7 MT in Q1FY14. On a sequential basis, while the
realisation/tonne improved by | 89.9 to | 4160.4, the EBITDA declined
| 55 to | 884/tonne in Q1FY14. On the positive side, real estate revenues
grew 175.2% YoY to | 454.3 crore, which led to revenue beat.
Interest coverage ratio at 0.9x, debt reduction need of the hour…
The interest coverage ratio at 0.9x in Q1FY14 is at the lowest level in the
last seven years. The interest expenses pressure is expected to weigh on
earnings till some meaningful debt reduction is seen. The management
has continued to maintain that it is looking to reduce ~| 6000 crore debt
by FY14 end through asset monetisation.
Balance sheet de-leveraging holds key for stock performance…
With the interest coverage ratio (0.9x in Q1FY14), lowest in the last seven
years, de-leveraging of balance sheet through asset monetisation is the
need of the hour and would act as key catalyst for the stock performance.
We have assigned a BUY rating with an SOTP based target price of | 50
purely on the valuation (currently trading at 0.6x FY14E P/BV).
��
JAL’s reported net profit in Q1FY14 was above our expectations on
account of one-time profit of | 395.3 crore (pre-tax) from sale of shares of
Jaypee Infratech during the quarter. However, the net profit after
adjusting for profit on sale works out to | 24.8 crore (decline of 82% YoY).
In the cement division, volumes grew 3.1% YoY to 3.7 MT while the
realisation improved by | 90/tonne at | 4160/tonne and the EBITDA
declined by | 55/tonne to | 884/tonne in Q1FY14. Going ahead, with the
interest coverage ratio (0.9x in Q1FY14) – lowest in the last seven years,
de-leveraging of balance sheet through asset monetisation is the need of
the hour and would act as a key catalyst for the stock performance.
Disappointing Q1FY14 results…
JAL’s adjusted net profit declined 82% YoY to | 24.8 crore due to lower
margins (22.9% in Q1FY14 vs. 26% in Q1FY13), and higher interest and
depreciation cost (grew 26.8% and 10.2% YoY to | 590 crore and | 194.3
crore, respectively). The standalone cement division volumes grew 3.1%
YoY to 3.7 MT in Q1FY14. On a sequential basis, while the
realisation/tonne improved by | 89.9 to | 4160.4, the EBITDA declined
| 55 to | 884/tonne in Q1FY14. On the positive side, real estate revenues
grew 175.2% YoY to | 454.3 crore, which led to revenue beat.
Interest coverage ratio at 0.9x, debt reduction need of the hour…
The interest coverage ratio at 0.9x in Q1FY14 is at the lowest level in the
last seven years. The interest expenses pressure is expected to weigh on
earnings till some meaningful debt reduction is seen. The management
has continued to maintain that it is looking to reduce ~| 6000 crore debt
by FY14 end through asset monetisation.
Balance sheet de-leveraging holds key for stock performance…
With the interest coverage ratio (0.9x in Q1FY14), lowest in the last seven
years, de-leveraging of balance sheet through asset monetisation is the
need of the hour and would act as key catalyst for the stock performance.
We have assigned a BUY rating with an SOTP based target price of | 50
purely on the valuation (currently trading at 0.6x FY14E P/BV).
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