Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaypee Infratech
Strong earnings but volume
disappoint, Maintain Buy
„1Q earnings better than expected; Maintain Buy
Jaypee Infratech reported 1Q earnings at Rs2.4bn, 10% ahead of our estimate of
Rs2.1bn. But the sales volume disappointed as JPI sold only 1.2mn sq ft for
Rs6bn. We maintain our Buy rating with PO of Rs65 given continued robust
cashflow from Noida project and the key triggers- commissioning of Yamuna
Expressway and launch of 2
nd
land parcel for sale is expected to play out over
next 9months. But we have cut our PO by 13% to factor in expected slower sales
in real estate and delay in tolling of expressway to FY13 against 3QFY12.
Volume to disappoint for next two quarters
We expect the sales volume will likely continue to disappoint for next two quarters given
the recent controversy in Noida and focus of JPI on launching premium projects in Noida
parcel. Though management is confident of returning to Rs10bn/qtr sales booking from
2Q itself. We expect the volume to bounce bank only once JPI launches second parcel
for sale (now unlikely before 4Q) at sub Rs2500/sq ft prices. Therefore we have cut our
sales booking estimate for FY12/13 by 15%.
Noida land controversy – longer term positive
We believe the recent controversy in Noida on land acquisition is longer term
positive for JPI given it should lead to sharp increase in land cost for other
developers and make further land acquisition difficult. JPI with huge land parcels
will thus enjoy an edge over competition not only because of cheap land but also
higher demand for its projects given clean and fully paid land bank.
Yamuna Expressway- tolling only from FY13
According to management the execution of the expressway is on track to be
opened for traffic from Dec 2011 but may not be tolled in initial 3-4months to
induce traffic. JPI has invested Rs105bn till 1QFY12 with concreting completed for
130kms while interchange work is nearing completion at 4 of the 5 locations..
Price objective basis & risk
Jaypee Infratech (XJAYF)
Our preferred valuation methodology is NAV, calculated by discounting the cash
flows from each of the real estate projects. Our price objective of Rs65 for Jaypee
Infratech is based on a 15% discount to our NAV of Rs77. We expect JIL to trade
at a discount of 15% to DLF on a discount-to-NAV basis, as JIL has a
concentrated land bank compared to DLF's diversified land bank. Also, the
uncertainties due to the new alignment of the expressway warrant a higher
discount to NAV, in our view. Key assumptions underlying our NAV are a WACC
of 14.8%, capitalization rate of 11% and inflation of 5% from FY12 on both selling
price and construction costs. On a P/E basis, at our PO of Rs65, the stock would
trade at 10x FY12E earnings. Downside risks are lower-than-expected real estate
sales volume and a delay in the execution of expressway project.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaypee Infratech
Strong earnings but volume
disappoint, Maintain Buy
„1Q earnings better than expected; Maintain Buy
Jaypee Infratech reported 1Q earnings at Rs2.4bn, 10% ahead of our estimate of
Rs2.1bn. But the sales volume disappointed as JPI sold only 1.2mn sq ft for
Rs6bn. We maintain our Buy rating with PO of Rs65 given continued robust
cashflow from Noida project and the key triggers- commissioning of Yamuna
Expressway and launch of 2
nd
land parcel for sale is expected to play out over
next 9months. But we have cut our PO by 13% to factor in expected slower sales
in real estate and delay in tolling of expressway to FY13 against 3QFY12.
Volume to disappoint for next two quarters
We expect the sales volume will likely continue to disappoint for next two quarters given
the recent controversy in Noida and focus of JPI on launching premium projects in Noida
parcel. Though management is confident of returning to Rs10bn/qtr sales booking from
2Q itself. We expect the volume to bounce bank only once JPI launches second parcel
for sale (now unlikely before 4Q) at sub Rs2500/sq ft prices. Therefore we have cut our
sales booking estimate for FY12/13 by 15%.
Noida land controversy – longer term positive
We believe the recent controversy in Noida on land acquisition is longer term
positive for JPI given it should lead to sharp increase in land cost for other
developers and make further land acquisition difficult. JPI with huge land parcels
will thus enjoy an edge over competition not only because of cheap land but also
higher demand for its projects given clean and fully paid land bank.
Yamuna Expressway- tolling only from FY13
According to management the execution of the expressway is on track to be
opened for traffic from Dec 2011 but may not be tolled in initial 3-4months to
induce traffic. JPI has invested Rs105bn till 1QFY12 with concreting completed for
130kms while interchange work is nearing completion at 4 of the 5 locations..
Price objective basis & risk
Jaypee Infratech (XJAYF)
Our preferred valuation methodology is NAV, calculated by discounting the cash
flows from each of the real estate projects. Our price objective of Rs65 for Jaypee
Infratech is based on a 15% discount to our NAV of Rs77. We expect JIL to trade
at a discount of 15% to DLF on a discount-to-NAV basis, as JIL has a
concentrated land bank compared to DLF's diversified land bank. Also, the
uncertainties due to the new alignment of the expressway warrant a higher
discount to NAV, in our view. Key assumptions underlying our NAV are a WACC
of 14.8%, capitalization rate of 11% and inflation of 5% from FY12 on both selling
price and construction costs. On a P/E basis, at our PO of Rs65, the stock would
trade at 10x FY12E earnings. Downside risks are lower-than-expected real estate
sales volume and a delay in the execution of expressway project.
No comments:
Post a Comment