PDF link: Punj Lloyd, Madhucon Project, Jaiprakash Associates:: Kotak Sec,

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http://www.kotaksecurities.com/pdf/dmb/MorningInsight15022012.pdf



PUNJ LLOYD LTD
RECOMMENDATION: REDUCE
TARGET  PRICE:  RS.60
FY13E P/E: 8.7


MADHUCON PROJECTS LTD (MPL)
RECOMMENDATION: BUY
TARGET  PRICE:  RS.105
FY13E P/E: 10.7X


JAIPRAKASH ASSOCIATES LTD
RECOMMENDATION: ACCUMULATE
TARGET  PRICE:  RS.89
FY13E P/E: 21.7X

Buy MADHUCON PROJECTS : TARGET PRICE: RS.110 : Kotak Sec

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MADHUCON PROJECTS LTD (MPL)
PRICE: RS.60 RECOMMENDATION: BUY
TARGET PRICE: RS.110 FY13E P/E: 9.0X
q Revenue growth of the company during Q2FY12 was better than our estimates
and stood at 18% YoY.
q Operating margins were better than our estimates due to higher execution
of power projects.
q Net profit was impacted by higher interest outgo as well as higher tax
rate.
q We thus tweak our FY12 estimates to factor in increased borrowings and
roll forward our valuations on FY13. We arrive at a revised price target of
Rs 110 (Rs 130 earlier) and continue to maintain BUY on the company
based on its valuations. Any delays seen in raising funds at the subsidiary
level may impact financial closure of its projects which may adversely
impact revenue growth.

Buy Madhucon Projects : 2QFY2012 Result Update: Angel Broking,

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For 2QFY2012, Madhucon Projects (MPL) reported a better-than-expected
performance on account of higher revenue booking and positive surprise on
EBITDAM, despite a huge jump in interest cost. MPL’s order book, which is
witnessing good traction, stands tall at 3.8x FY2011 revenue, providing good
visibility for the next couple of years. However, we are revising our numbers for
FY2012 and FY2013 to factor in the higher interest outgo and working capital
stretch. Nevertheless, given the sharp price decline, we maintain our Buy
recommendation on the stock.
Numbers beat estimates despite a sharp spike in interest cost: For 2QFY2012,
MPL reported above-expectation top-line of `416.0cr, up 18.3% yoy, against our
expectation of `356.9cr. This was mainly on account of higher revenue booking
in its captive BOT projects in the power segment. Further, management has
guided for revenue of `2,000cr for the year (we have factored the same) for
FY2012. OPM for the quarter stood at 13.0% (9.7%), posting a whopping jump of
330bp yoy against our expectation of a 100bp jump. Management has guided
for higher OPM of 12.0–12.5% (earlier guidance of 11.0-12.0%) for the year as a
whole. On the earnings front, the company posted a 10.2% yoy decline to `6.0cr
against our expectation of a 52.4% decline despite a shocking increase (173.3%
yoy/53.8% qoq) in interest cost for the quarter to `31.8cr.
Outlook and valuation – Raising capital is the key catalyst: We believe key triggers
to watch out for MPL should be pick-up in execution in the development business
and raising money for the same. However, these plans would fructify somewhere
in FY2013 only and will be based on the market conditions prevailing then.
Hence, we believe until then the stock would be a sector performer and real value
would be created only on unlocking at the subsidiary level. We have valued MPL
on an SOTP basis to arrive at a revised target price of `88/share (`96/share) and
maintain our Buy rating on the stock.

MPL bags orders worth `202cr; ties debt for 2 BOT projects – Maintain Buy::Angel Broking,

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MPL bags orders worth `202cr; ties debt for 2 BOT projects – Maintain Buy
Madhucon Projects (MPL) has bagged orders worth `202cr on the irrigation side from the
Gujarat government. Further, on the BOT front, the company has been able to achieve
financial closure for Barasat Krishnagar, NHAI annuity road project costing around
`980cr; and for Ranchi Rargon Jamshedpur, NHAI BOT annuity project costing `1,655cr.
MPL is also declared as L1 for the Vijayawada-Machilipatnam road project on DBFOT
basis with a project cost of ~`730cr. This order booking and timely tying up of funds for
captive projects augur well for the company and enhance its total order book to
~`6,500cr, providing revenue visibility for the next few years. We maintain our Buy
recommendation on the stock with a target price of `106/share, owing to 1) strong order
book with increasing share of active orders; 2) decent portfolio of BOT assets – road (four
operational and four under different stages of development) and power (Phase I of
300MW nearing completion and Phase II of 300MW under development); and
3) the ~50% decline in the stock price in the last 12 months, bringing the stock to
undemanding valuations.

Buy MADHUCON PROJECTS: TP Rs109: PINC

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Fund raising key for project subsidiaries
Phase I power project to be synchronized
Phase I power project of 300MW of the 1,920MW at Nellore, AP is likely to be
synchronized in a month’s time. MPL has arrangement with PTC for 100% of coal
supply from 70% earlier for phase I and for phase II, PTC will supply 50% of the coal
requirement (refer pg no. 2).
Rate revised upward to Rs1.45/unit
The conversion rate for PTC power contract has been increased to Rs1.45/unit for
Phase I and Rs1.50/unit for Phase II from earlier rate of Rs1.25/unit for phase I. This
is largely due to delay in plant completion and rationalization of cost (refer pg no.2).
Dilution on card; looking at Rs16-22bn for MTHL
Madhucon is looking for dilution in Madhucon Toll Highway (MTHL) & Simhapuri
Energy Pvt. Ltd. (SEL) and is actively scouting for private equity deals. The company’s
internal valuation for MTHL is ranging from Rs16-22bn and for SEL is Rs30bn (including
phase III).
L1 in Vijayawada-Machilipatnam road project
The company is L1 in Vijayawada-Machilipatnam project on DBFOT toll basis.
The project involves four laning 63km (258 lane km) of existing section on NH9
(refer pg no. 2).
Orderbook at Rs62.7bn; 3.7x FY11 revenue
Orderbook continues to be strong at Rs62.7bn (3.7x FY11 revenue), largely due to
internal orders of road and power. Excluding Andhra Pradesh irrigation project of
Rs13bn, book to bill ratio stands at 2.9x FY11 revenue (refer pg no. 3).
VALUATIONS & RECOMMENDATION
We revise our target price to Rs109 from earlier Rs141 due to a) increase in cost of
equity for BOT road and power phase I projects to bring it inline with the current
market risk, resultantly we have raised cost of equity to 15% from 13%. b) Earlier
we had valued mining project at one time equity investment i.e. Rs410mn (Rs5 per
share), now we wait till the logistical issue is resolved. c) The core EPC business
earnings have been revised downward by 4.1% and 16.7% for FY12E and FY13E
due to higher interest cost factored at 11.5%, now the total debt in MPL stands at
Rs7.5bn (1.1x D/E FY11) and is likely to increase to 1.3x by FY12 end. We maintain
our ‘BUY’ recommendation.

Buy MADHUCON PROJECTS : target Rs 140: Kotak Sec,

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MADHUCON PROJECTS LTD (MPL)
RECOMMENDATION: BUY
TARGET PRICE: RS.140
FY12E P/E: 9.9X
q Madhucon Projects has emerged as a key beneficiary in bagging orders
worth Rs 27 bn in annuity segment during Q4FY11
q Company is also pre-qualified to bid for other upcoming projects from
NHAI
q We marginally tweak our estimates and continue to maintain BUY on
MPL with an unchanged price target of Rs 140 based on sum-of-the-parts
valuation on FY12 estimates

Angel Broking:: Madhucon Project, MPL bags road project worth `1,200cr

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MPL bags road project worth `1,200cr
Madhucon Projects Limited (MPL) has bagged an annuity project worth `1,200cr from
National Highway Authority of India for the four-laning of Barsasat-Krishnagar section, West
Bengal. The project is awarded under the National Highway Development Programme – III
on DBFOT basis with semi-annual annuity of `73.98cr. The concession period is 17 years,
including a construction period of 30 months. With this order, MPL’s outstanding order book
stands at `4,100cr (2.5x FY2011E revenue), thus enhancing revenue visibility. Further, this is
positive as the company will be able to book EPC revenue in the coming quarters from this
project, hence boosting its overall revenue.
The key triggers to watch out for MPL should be the pickup in execution in the development
business and building of an attractive asset portfolio before it plans to raise money via IPO,
which would fructify somewhere in FY2012 only and will be based on market conditions
prevailing then. Hence, we believe that till then the stock would be a sector performer and
real value would be created only on unlocking at the subsidiary level. Our SOTP target price
is arrived by assigning a P/E of 10x on FY2012E earnings (`89.9/share), valuing BOT
projects on NPV basis (`52.0/share) and other investments in Madhucon Infra and the real
estate venture on BV basis (`25.2/share and `3.9/share, respectively). We maintain our Buy
view on the stock with an SOTP Target Price of `171.

Kotak Sec, : Buy Madhucon Project, Target Price: Rs.140

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MADHUCON PROJECTS LTD (MPL)
RECOMMENDATION: BUY
TARGET PRICE: RS.140
FY12E P/E: 9.7X
q Madhucon Projects Ltd reported 26% YoY growth in revenues for
Q3FY11 which was lower than our estimates.
q Operating margins stood at 12.73% for Q3FY11, better than our estimates.
This was due to higher proportion of power segment revenues in
the current quarter.
q Net profits grew by 6% YoY and are impacted by lower revenue growth
and higher interest outgo in comparison with last year.
q At current price of Rs 87, stock is trading at 10.2x and 9.7x P/E for FY11
and FY12 respectively. We take into account lower than expected order
inflows and thereby reduce our target P/E multiple for core business to
8x one year forward earnings. Due to delays seen in Trichy and Tuticorin
road BOT projects, we reduce our valuations from these projects. Along
with this, with delay seen in the fund raising plans of the company, we
also don't include coal mining valuations in our target valuations.
q We thus arrive at a revised price target of Rs 140 (Rs 191 earlier) on FY12
estimates. Due to decent upside from the current levels, we continue to
maintain BUY on the stock.

Buy Madhucon Projects Target Price of Rs. 171; 3QFY2011 - Angel Broking

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Madhucon Projects – 3QFY2011 Result Update

Angel Broking maintains a Buy on Madhucon Projects with a Target Price of Rs. 171.

Madhucon Projects (MPL) reported broadly in-line numbers for 3QFY2011, with
the surprise on the margin front. MPL’s order book at 2.5x FY2011E revenues
provides good revenue visibility. However, we are revising our numbers for
FY2011 and FY2012 to factor in the lower top-line, other income and higher
operating margins. We maintain a Buy on the stock.

Madhucon Project-financial closure for its road project ::, Angel Broking,

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MPL achieves financial closure for its road project – A positive development
Madhucon Projects Ltd. (MPL) has achieved financial closure (FC) for Chhapra-Hajipur
Expressway DBFOT project. The total funds tied are worth `585cr. The project was
awarded by NHAI in May 2010 on DBFOT basis with a concession period of 15 years,
including a construction period of 30 months. This is positive as the company will be able
to book EPC revenue in the coming quarters from this project, thus boosting its
overall revenue.

Madhucon Projects: 2QFY2011 Result Update: Angel Broking

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Madhucon Projects (MPL) reported top-line growth ahead of our estimates, led
primarily by pick up in execution in the power segment. However, earnings were
below our expectations mainly on account of higher interest cost and tax
provision. MPL’s order book at 2.6x FY2011E revenues, gives good revenue
visibility. Owing to the broadly in-line performance, we maintain our numbers
and Buy recommendation on the stock with a SOTP Target Price of `173.

Initiating Coverage report on Madhucon Projects: Keynote

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Initiating Coverage report on Madhucon Projects Ltd., an ideal play on construction, road and power.

Madhucon Project Ltd (MPL), a mid-sized domestic infrastructure construction company, engaged in execution of projects in roads and expressways, power, water & property development. With an order book of Rs4900Cr as on Q1FY11, MPL enjoys sustainable revenue visibility. Additionally, the company is aggressively expanding in road BOT projects, the power generation space and three coal mines in Indonesia, which would unlock value in the long-term.

Executive Summary

Infra vertical in FY11 - the threshold for project completion

Madhucon Projects Ltd’s (MPL) Phase I power project provides a healthy business proposition with ROE of 24.7%. The coal mining business will start contributing to profits FY11 onwards on external sales, as MPL's power capacities go on stream FY13 onwards. Road toll revenue has also begun and would touch Rs170Cr by FY12. Hence, FY11 would be an inflection point where MPL builds threshold infrastructure vertical capacity that would be important for its re-rating.

Operational BOT projects clocked Rs13Cr revenue

The toll collection from two operational BOT projects touched Rs1.3Cr for the quarter, Agra-Jaipur Expressway has collected Rs0.7Cr whereas Dindigul-Karur has collected Rs0.6Cr. Madurai-Tuticorin is awaiting final notification for its commencement and is likely to be operational from end of October 2010, and Trichy-Thanjavur is likely to commence operation from November 2010.

Commencement of BOT projects in power & roads to boost revenue

Two BOT road projects and 300MW power project is expected to be operational by end of this fiscal year. Per day revenue on Trichy-Thavendur is expected to be Rs12.8 lakhs and in Madurai-Tuticorn would be around Rs20 lakhs. As far the power project, the company has already tied up with PTC and Reliance Infra with annual turnover of around Rs40Cr in current fiscal year.

Valuation:

We expect the company’s revenues to grow at 25% and 47% for FY11E & FY12E respectively. Based on the SOTP valuation, we recommend ‘buy’ with the target price of Rs188/- per share.