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Jaiprakash Associates Ltd.------------------------------------------------Maintain OUTPERFORM
3Q11 results above estimates; CY11 to witness strong execution
● JPA’s recurring PAT of Rs2.3 bn (up 28% YoY) was 44% ahead of
our estimate. The street’s estimates were in a wide range of
Rs1.4-3.3 bn.
● The positive surprise on our expectation was led by: 1) a betterthan-expected construction business margin of 21.4%, due to the
faster execution of its high-margin Karcham Wangtoo hydro power
project; and 2) strong real estate sales alongwith margins of 69%,
much higher than about 40% observed over the last few quarters.
● However, we are concerned about the performance of its cement
business – the realisation has fallen 5% sequentially vs growth
posted by several cement manufacturers, and cement margins
have declined 409 bp sequentially on rising costs, mainly coal.
Cement sales volumes posted a 32% growth YoY (7%
sequentially).
● We reduce our FY11/12/13E EPS by 21%/14%/11%, mainly
based on our estimate cuts on the cement business. We lower our
target price from Rs179 to Rs146 (Figure 4). We expect JPA to
witness strong execution and commencement of large projects
during CY11. We believe the recent sharp stock correction
provides a buying opportunity. We maintain our OUTPERFORM.
3Q11 results 44% above our estimates
JPA’s 3Q11 recurring PAT of Rs2.3 bn was 44% ahead our estimate.
However, the street’s profit estimates were in a wide range of Rs1.4-
3.3 bn. The positive surprise was led by: 1) construction margin of
21.4% vs our expectation of 18%; 2) higher-than-expected booking of
sales at its Greater Noida project (real estate sales were 31% ahead
of our estimate); and 3) reported real estate margin of 69%, much
higher than about 40% observed over the last few quarters.
Cement business performance disappointed
JPA posted 32% YoY growth (7% QoQ) in cement sales volumes, led by
ramp-up in new capacities. However, cement realisation at
Rs3,363/tonne was down 5% QoQ vs 3-5% growth registered by several
cement manufacturers. Cement margin also fell sharply by 409 bp QoQ
on rising costs, mainly led by the use of higher-cost imported and eauction coal. Cement profit was 33% below our estimate.
Cut EPS estimates, target price; maintain OUTPERFORM
We reduce our FY11/12/13E EPS by 21%/14%/11%, mainly led by our
estimate cuts on the cement business. We lower our target price from
Rs179 to Rs146 (Figure 4). We expect JPA to commence large
projects during CY11 – 1 GW Karcham hydro power project (3Q), F1
race track (4Q), Yamuna Expressway (4Q) and 0.5 GW Bina-I coal
power project (4Q). We believe the recent sharp correction in the
stock price provides a buying opportunity. We maintain our
OUTPERFORM rating on JPA
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaiprakash Associates Ltd.------------------------------------------------Maintain OUTPERFORM
3Q11 results above estimates; CY11 to witness strong execution
● JPA’s recurring PAT of Rs2.3 bn (up 28% YoY) was 44% ahead of
our estimate. The street’s estimates were in a wide range of
Rs1.4-3.3 bn.
● The positive surprise on our expectation was led by: 1) a betterthan-expected construction business margin of 21.4%, due to the
faster execution of its high-margin Karcham Wangtoo hydro power
project; and 2) strong real estate sales alongwith margins of 69%,
much higher than about 40% observed over the last few quarters.
● However, we are concerned about the performance of its cement
business – the realisation has fallen 5% sequentially vs growth
posted by several cement manufacturers, and cement margins
have declined 409 bp sequentially on rising costs, mainly coal.
Cement sales volumes posted a 32% growth YoY (7%
sequentially).
● We reduce our FY11/12/13E EPS by 21%/14%/11%, mainly
based on our estimate cuts on the cement business. We lower our
target price from Rs179 to Rs146 (Figure 4). We expect JPA to
witness strong execution and commencement of large projects
during CY11. We believe the recent sharp stock correction
provides a buying opportunity. We maintain our OUTPERFORM.
3Q11 results 44% above our estimates
JPA’s 3Q11 recurring PAT of Rs2.3 bn was 44% ahead our estimate.
However, the street’s profit estimates were in a wide range of Rs1.4-
3.3 bn. The positive surprise was led by: 1) construction margin of
21.4% vs our expectation of 18%; 2) higher-than-expected booking of
sales at its Greater Noida project (real estate sales were 31% ahead
of our estimate); and 3) reported real estate margin of 69%, much
higher than about 40% observed over the last few quarters.
Cement business performance disappointed
JPA posted 32% YoY growth (7% QoQ) in cement sales volumes, led by
ramp-up in new capacities. However, cement realisation at
Rs3,363/tonne was down 5% QoQ vs 3-5% growth registered by several
cement manufacturers. Cement margin also fell sharply by 409 bp QoQ
on rising costs, mainly led by the use of higher-cost imported and eauction coal. Cement profit was 33% below our estimate.
Cut EPS estimates, target price; maintain OUTPERFORM
We reduce our FY11/12/13E EPS by 21%/14%/11%, mainly led by our
estimate cuts on the cement business. We lower our target price from
Rs179 to Rs146 (Figure 4). We expect JPA to commence large
projects during CY11 – 1 GW Karcham hydro power project (3Q), F1
race track (4Q), Yamuna Expressway (4Q) and 0.5 GW Bina-I coal
power project (4Q). We believe the recent sharp correction in the
stock price provides a buying opportunity. We maintain our
OUTPERFORM rating on JPA
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