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Jaiprakash Associates (JPA)
Others
Construction earnings offset cement weakness. Robust construction revenues
(-1% yoy, 22% qoq) and margins (36% EBIT margins) helped Jaiprakash Associate (JAL)
offset seasonal weakness in the cement business. We are encouraged by strong
execution of the power segment though we remain watchful of standalone debt which
increased to Rs231 bn from Rs217 bn as of September 2011 against standalone capex
of Rs20 bn in 1HFY12. We maintain our BUY rating with a revised target price of Rs105
(previously Rs115) as we adjust for higher standalone net debt.
Earnings boosted by robust construction revenues, other income
JAL reported standalone revenues of Rs30.7 bn (2% yoy, -2% qoq), operating profits of Rs6.8 bn
(flat yoy, -7% qoq) and net income of Rs1.3 bn (14% yoy, 20% qoq) for 2QFY12 against our
estimate of Rs30.4 bn, Rs6.6 bn and Rs615 mn, respectively. Operating profits met our estimates
as weakness in cement and real estate segments was offset by robust construction revenues of
Rs15.6 bn (against our estimate of Rs13.3 bn) and EBIT margin of 36% (against our estimate of
16%). Reported net income was further boosted by (1) higher other income Rs1.2 bn (against our
estimate of Rs453 mn) likely on account of Rs560 mn from investments and (2) lower interest cost.
We discuss the performance of each segment in detail in subsequent sections.
Cement restructuring paves way for asset sale
JAL board has approved a proposal to demerge its cement plants in Gujarat (operational capacity
of 4.8 mtpa) and Andhra Pradesh (5 mtpa of capacity nearing completion) into a wholly owned
subsidiary (Jaypee Cement Corporation Limited), which is also implementing a 3 mtpa plant in
Karnataka. In our view, this restructuring paves the way for JAL to sell the demerged cement
assets (as has been speculated in the media) and may help raise funds for debt repayment.
Project execution remains impressive, Karcham Wangtoo fully commissioned
During the quarter, Jaiprakash Power Ventures Ltd. (JPVL) commissioned the balance two units of
Karcham Wangtoo, thus taking the total capacity to 1,700 MW. We further highlight that the
performance of the newly commissioned units was impressive (aided partly by the monsoon) with
gross generation of 1,251 MU implying a PLF of ~70% in 2QFY12.
Maintain BUY with a revised target price of Rs105/share
We maintain our BUY rating with a revised target price of Rs105/share (previously Rs115/share) as
we adjust for higher standalone net debt.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaiprakash Associates (JPA)
Others
Construction earnings offset cement weakness. Robust construction revenues
(-1% yoy, 22% qoq) and margins (36% EBIT margins) helped Jaiprakash Associate (JAL)
offset seasonal weakness in the cement business. We are encouraged by strong
execution of the power segment though we remain watchful of standalone debt which
increased to Rs231 bn from Rs217 bn as of September 2011 against standalone capex
of Rs20 bn in 1HFY12. We maintain our BUY rating with a revised target price of Rs105
(previously Rs115) as we adjust for higher standalone net debt.
Earnings boosted by robust construction revenues, other income
JAL reported standalone revenues of Rs30.7 bn (2% yoy, -2% qoq), operating profits of Rs6.8 bn
(flat yoy, -7% qoq) and net income of Rs1.3 bn (14% yoy, 20% qoq) for 2QFY12 against our
estimate of Rs30.4 bn, Rs6.6 bn and Rs615 mn, respectively. Operating profits met our estimates
as weakness in cement and real estate segments was offset by robust construction revenues of
Rs15.6 bn (against our estimate of Rs13.3 bn) and EBIT margin of 36% (against our estimate of
16%). Reported net income was further boosted by (1) higher other income Rs1.2 bn (against our
estimate of Rs453 mn) likely on account of Rs560 mn from investments and (2) lower interest cost.
We discuss the performance of each segment in detail in subsequent sections.
Cement restructuring paves way for asset sale
JAL board has approved a proposal to demerge its cement plants in Gujarat (operational capacity
of 4.8 mtpa) and Andhra Pradesh (5 mtpa of capacity nearing completion) into a wholly owned
subsidiary (Jaypee Cement Corporation Limited), which is also implementing a 3 mtpa plant in
Karnataka. In our view, this restructuring paves the way for JAL to sell the demerged cement
assets (as has been speculated in the media) and may help raise funds for debt repayment.
Project execution remains impressive, Karcham Wangtoo fully commissioned
During the quarter, Jaiprakash Power Ventures Ltd. (JPVL) commissioned the balance two units of
Karcham Wangtoo, thus taking the total capacity to 1,700 MW. We further highlight that the
performance of the newly commissioned units was impressive (aided partly by the monsoon) with
gross generation of 1,251 MU implying a PLF of ~70% in 2QFY12.
Maintain BUY with a revised target price of Rs105/share
We maintain our BUY rating with a revised target price of Rs105/share (previously Rs115/share) as
we adjust for higher standalone net debt.
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