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Jaiprakash Associates (JPA)
Initiate OW(V): Getting back in shape
Multiple positives as expressway, new power and cement
plants start operations, driving 27% EPS CAGR over FY12e-14e
We anticipate that JPA can successfully bring down leverage
over the next two years – a big share price catalyst
Initiate with OW(V) and TP of INR97. Key downside risk is reinvestment
in new capacity
Multiple positives on the horizon; we estimate a 27% EPS CAGR over FY12e-14e.
JPA’s ambitious six-lane 165km Yamuna expressway project is likely to start operation in
April 2012, while its 5MTPA cement plant in south India will start firing from Q1 FY13.
The company recently commissioned its 1,000MW hydro project and will commission its
500MW thermal project during Q2 FY13 and its 1,320MW thermal project by end Q2 FY14.
We estimate that these new projects will drive a consolidated EPS CAGR of 27% over
FY12-14. We are 20-45% above consensus on FY12e-14e earnings.
Deleveraging should lower earnings and valuation volatility – a big price catalyst.
We highlight JPA’s strong core operating performance (FY12e-14e EBITDA CAGR of
29%) and tapering capex which, in our view, will compliment its deleveraging drive over
the next 12-18 months. The stock has also performed well over the past three months, as
improved market sentiment has lowered concerns about fund-raising at low prices, and we
anticipate further room for appreciation. We anticipate that standalone net debt/equity will
fall to 1.6x by FY14e (2.3x in FY12e) and consolidated net debt/equity to 2.5x in FY14e
(3.3x in FY12e), lowering earnings and valuation volatility.
Initiate with OW(V) and TP of INR97. Our target price values JPA at an implied multiple
of 12.3x FY13e consolidated EPS while it is trading at 13.3x currently and its three-year
average has been 18.6x. JPA’s real estate and construction business contributes c46% of
the value while its cement business contributes c35% and the power business contributes
c20%. Any signs of re-investment in new capacity are key downside risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaiprakash Associates (JPA)
Initiate OW(V): Getting back in shape
Multiple positives as expressway, new power and cement
plants start operations, driving 27% EPS CAGR over FY12e-14e
We anticipate that JPA can successfully bring down leverage
over the next two years – a big share price catalyst
Initiate with OW(V) and TP of INR97. Key downside risk is reinvestment
in new capacity
Multiple positives on the horizon; we estimate a 27% EPS CAGR over FY12e-14e.
JPA’s ambitious six-lane 165km Yamuna expressway project is likely to start operation in
April 2012, while its 5MTPA cement plant in south India will start firing from Q1 FY13.
The company recently commissioned its 1,000MW hydro project and will commission its
500MW thermal project during Q2 FY13 and its 1,320MW thermal project by end Q2 FY14.
We estimate that these new projects will drive a consolidated EPS CAGR of 27% over
FY12-14. We are 20-45% above consensus on FY12e-14e earnings.
Deleveraging should lower earnings and valuation volatility – a big price catalyst.
We highlight JPA’s strong core operating performance (FY12e-14e EBITDA CAGR of
29%) and tapering capex which, in our view, will compliment its deleveraging drive over
the next 12-18 months. The stock has also performed well over the past three months, as
improved market sentiment has lowered concerns about fund-raising at low prices, and we
anticipate further room for appreciation. We anticipate that standalone net debt/equity will
fall to 1.6x by FY14e (2.3x in FY12e) and consolidated net debt/equity to 2.5x in FY14e
(3.3x in FY12e), lowering earnings and valuation volatility.
Initiate with OW(V) and TP of INR97. Our target price values JPA at an implied multiple
of 12.3x FY13e consolidated EPS while it is trading at 13.3x currently and its three-year
average has been 18.6x. JPA’s real estate and construction business contributes c46% of
the value while its cement business contributes c35% and the power business contributes
c20%. Any signs of re-investment in new capacity are key downside risks.
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