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Jaiprakash (JAIA.BO)
FY11E Has Been Poor So Far – FY12E Could Be Crucial
3QFY11 Recurring PAT down 31% YoY — After delivering Recurring PAT down
43%/3% YoY in 1Q/2Q, JPA’s 3QFY11 Recurring PAT was down 26% YoY. Though
3QFY11 Recurring PAT was 8% ahead of CIRA expectations, the poor
performance of the cement and construction overshadowed the positives of real
estate and effective tax rate normalizing after a severe jump up in 2Q.
Target price cut to Rs132 (from Rs154) — TP cut factors in: (1) earnings cut of
10-26% over FY11-13E; (2) cut in the construction EV/EBITDA multiple to 7x (from
8x); (3) JPVL at a 10% discount to our new TP of Rs65 (from Rs70); and (4) JIL at
a 10% discount to the current market price of Rs70 (from Rs90). We maintain Buy
because the stock trades at a significant discount to its asset based valuation.
Back-of-the-envelope calculations suggest stock worth ~Rs130 — Parent
business should deliver 10% EPS growth over FY10-13E with RoEs of ~10% and
giving it a 10x P/E or 1x P/BV on FY12E yields a value of Rs46. At the current
price of Rs66 for JIL, Rs46 for JPVL and our DCF value for Karcham Wangtoo
these businesses yield Rs84. Adding these to the stock is worth ~Rs130 on backof-the-envelope calculations. But it has been languishing at sub-Rs90 levels.
What are investors looking for? — That JPA’s asset-based valuation is far
higher than the company’s market capitalization cannot be disputed. However, as
seen with other infrastructure developers like GMR and GVK, just owning multiple
assets cannot support stock price performance. The assets need to either
generate free cash flows or provide EPS growth in a consistent fashion for the
stock to perform like say Mundra Ports and SEZ.
FY12E could be crucial year — (1) Comissioning of 1.2GW Karcham & 0.5GW
Bina would increase JPVL’s capacity to 2.4GW end-FY12E. (2) Real estate
performance in JIL has been strong. If toll road economics are not as bad as
expected, it would help significantly. (3) Low base effect of FY11E PAT.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaiprakash (JAIA.BO)
FY11E Has Been Poor So Far – FY12E Could Be Crucial
3QFY11 Recurring PAT down 31% YoY — After delivering Recurring PAT down
43%/3% YoY in 1Q/2Q, JPA’s 3QFY11 Recurring PAT was down 26% YoY. Though
3QFY11 Recurring PAT was 8% ahead of CIRA expectations, the poor
performance of the cement and construction overshadowed the positives of real
estate and effective tax rate normalizing after a severe jump up in 2Q.
Target price cut to Rs132 (from Rs154) — TP cut factors in: (1) earnings cut of
10-26% over FY11-13E; (2) cut in the construction EV/EBITDA multiple to 7x (from
8x); (3) JPVL at a 10% discount to our new TP of Rs65 (from Rs70); and (4) JIL at
a 10% discount to the current market price of Rs70 (from Rs90). We maintain Buy
because the stock trades at a significant discount to its asset based valuation.
Back-of-the-envelope calculations suggest stock worth ~Rs130 — Parent
business should deliver 10% EPS growth over FY10-13E with RoEs of ~10% and
giving it a 10x P/E or 1x P/BV on FY12E yields a value of Rs46. At the current
price of Rs66 for JIL, Rs46 for JPVL and our DCF value for Karcham Wangtoo
these businesses yield Rs84. Adding these to the stock is worth ~Rs130 on backof-the-envelope calculations. But it has been languishing at sub-Rs90 levels.
What are investors looking for? — That JPA’s asset-based valuation is far
higher than the company’s market capitalization cannot be disputed. However, as
seen with other infrastructure developers like GMR and GVK, just owning multiple
assets cannot support stock price performance. The assets need to either
generate free cash flows or provide EPS growth in a consistent fashion for the
stock to perform like say Mundra Ports and SEZ.
FY12E could be crucial year — (1) Comissioning of 1.2GW Karcham & 0.5GW
Bina would increase JPVL’s capacity to 2.4GW end-FY12E. (2) Real estate
performance in JIL has been strong. If toll road economics are not as bad as
expected, it would help significantly. (3) Low base effect of FY11E PAT.
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