Showing posts with label Jaypee Infratech. Show all posts
Showing posts with label Jaypee Infratech. Show all posts
15 September 2013
12 February 2013
Jaypee Infratech Ltd :: Team Microsec Research
Jaypee Infratech Ltd announced its Q3 FY13 results on 11th February 2013.
The company has posted a standalone profit of Rs 155 Crore for the third quarter ended December 31, 2012 as compared to profit of Rs 392 Crore for the quarter ended December 31, 2011. Total income has increased from Rs 903 Crore for the quarter ended December 31, 2011 to Rs 933 Crore for the quarter ended December 31, 2012, representing an increase of 3%.
EBITDA Margin of the company decreased from 54.87% to 45.27%, registering a decrease of 9.6%.
The increase in Finance cost is on account of interest charged to statement of Profit & Loss, upon commissioning of the Yamuna Expressway.
Regards,
Team Microsec Research
11 October 2011
Jaypee Infratech- Excess supply in Noida; downgrade to Underperform BofA Merrill Lynch,
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J aypee Infratech
Excess supply in Noida;
downgrade to Underperform
PO lowered to Rs44; expressway unlikely to be key driver
We downgrade Jaypee Infratech (JIL)’s rating to Underperform with a reduced PO
of Rs44 (cut from Rs65). Our PO, which factors in sluggish volume and prices in
Noida over the next couple of years due to oversupply, is based on a 25% (15%
earlier) discount to our NAV of Rs62. We believe the best of real estate operations
for JIL is behind us and volumes and cash flows will largely disappoint the market
from here on, while expressway is unlikely to be the key driver.
Oversupply in Noida: Key concern
We have lowered our NAV estimate primarily to factor in lower volume and prices
in Noida and Greater Noida regions due to massive oversupply. We expect the
supply surge seen from 2009 will take at least 2-3 years to even out. We expect
this will lead to a slowdown in sales for JIL in its Noida project over the next
several quarters. Also, other land parcels (outskirts of Noida) will continue to see
lukewarm response given the oversupply and subdued prices in Noida itself.
Unexciting earnings on slow volume and execution delays
We have cut our earnings estimate for FY13/14 by 15% and 32% to factor in
lower volume and prices in Noida leading to flat earnings for next two years. Also,
on execution front, we believe JIL is lagging by 9-12 months and our estimate
suggests over 66% of the expected cash flows from pre-sold projects will be
utilized for construction, leaving aside limited surplus for debt repayment.
Expressway nearing completion but no upside in sight
The expressway is in its last stage of construction and should be completed in the
next six months, but it will likely not lead to stock’s rerating. Toll collection in the
initial 2-3 years will be subdued, while JIL may face opposition in making Noida-
Greater Noida Expressway, which contributes 20% of expressway valuation, a toll
For complete sector report and details on other companies click link below
Real Estate/Property - India Fallen Angels: bottom fish selectively �� BofA Merrill Lynch
20 August 2011
Jaypee Infratech - Strong earnings but volume disappoint, Buy ::BofA Merrill Lynch,
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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.
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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.
19 August 2011
Jaypee Infratech - Land protests and slowing execution to weigh on stock performance in the short term::JPMorgan,
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JPIN’s recent reported results point to a slowdown in both sales and
execution of RE projects on the back of farmer protests in the neighboring
land parcels. While the stock has corrected sharply over the recent past
(-50% YTD CY11) and valuations look attractive (FY12E 4.5x P/E, FY12E
1x P/BV), ongoing land acquisition concerns in UP and overall weak
macro environment will likely continue to weigh on the stock performance
in the near term, in our view.
Jun-Q new bookings of Rs6B (1.3msf) were lower than FY10/11 sales
run rate with only one new project launched during the quarter (Aman
II- 1msf). Farmer protests around land acquisition in Noida extension
area and G Noida (unrelated to JPA land parcels) adversely impacted the
buyer sentiment and sales volumes in Jun-Q. Company indicated that
sales momentum has picked up in July and has kept its FY12 guidance
unchanged at Rs40B (JPMe Rs27B) with new project launches being
planned in Guatam Buddha Nagar (parcel 3) around mid Sep.
Work on Yamuna Expressway project is progressing well, according
to the company, with over 80% of concreting work already complete.
Additional capex of Rs8B was incurred on the road project during the
quarter taking the overall cost incurred till date to Rs106B (~90% of the
total cost estimate of Rs117B). We note that the cost of the project was
revised upwards by Rs20B during Mar-Q due to increased land cost & IDC.
1Q results recap: JPIN’s reported 1Q earnings of Rs2.4B (-5% Q/Q)
were below expectations, primarily due to lower-than-expected revenue
recognition (Rs6B, -14% Q/Q). Execution progress on the ongoing
projects seems to be lagging the bookings run rate seen over the last two
years (o/s order book of >Rs75B). The company expects the recognition
to pick up in 2H. EBITDA margin at 48% improved by 200bp Q/Q and
is tracking in line with te company’s guidance of 45-50% range.
Estimate and PT revisions: We revise down our FY12/13 estimates by
5%/11% as we (a) factor in delay in road commencement and higher
project cost, and b) reduce our FY12/13 pre-sales assumptions by 5-8%.
Our Mar-12 PT is revised down to Rs55 based on 10x stabilized FCFE.
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JPIN’s recent reported results point to a slowdown in both sales and
execution of RE projects on the back of farmer protests in the neighboring
land parcels. While the stock has corrected sharply over the recent past
(-50% YTD CY11) and valuations look attractive (FY12E 4.5x P/E, FY12E
1x P/BV), ongoing land acquisition concerns in UP and overall weak
macro environment will likely continue to weigh on the stock performance
in the near term, in our view.
Jun-Q new bookings of Rs6B (1.3msf) were lower than FY10/11 sales
run rate with only one new project launched during the quarter (Aman
II- 1msf). Farmer protests around land acquisition in Noida extension
area and G Noida (unrelated to JPA land parcels) adversely impacted the
buyer sentiment and sales volumes in Jun-Q. Company indicated that
sales momentum has picked up in July and has kept its FY12 guidance
unchanged at Rs40B (JPMe Rs27B) with new project launches being
planned in Guatam Buddha Nagar (parcel 3) around mid Sep.
Work on Yamuna Expressway project is progressing well, according
to the company, with over 80% of concreting work already complete.
Additional capex of Rs8B was incurred on the road project during the
quarter taking the overall cost incurred till date to Rs106B (~90% of the
total cost estimate of Rs117B). We note that the cost of the project was
revised upwards by Rs20B during Mar-Q due to increased land cost & IDC.
1Q results recap: JPIN’s reported 1Q earnings of Rs2.4B (-5% Q/Q)
were below expectations, primarily due to lower-than-expected revenue
recognition (Rs6B, -14% Q/Q). Execution progress on the ongoing
projects seems to be lagging the bookings run rate seen over the last two
years (o/s order book of >Rs75B). The company expects the recognition
to pick up in 2H. EBITDA margin at 48% improved by 200bp Q/Q and
is tracking in line with te company’s guidance of 45-50% range.
Estimate and PT revisions: We revise down our FY12/13 estimates by
5%/11% as we (a) factor in delay in road commencement and higher
project cost, and b) reduce our FY12/13 pre-sales assumptions by 5-8%.
Our Mar-12 PT is revised down to Rs55 based on 10x stabilized FCFE.
13 August 2011
Jaypee Infratech -- Wait for better timing :: Macquarie Research,
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Jaypee Infratech
Wait for better timing
Event
Jaypee Infratech (JPIN) released 1Q FY12 results today. PAT was 6% below
our forecast due to weaker-than-expected sales. Our earnings estimates and
NAV are unchanged. However, we have increased our target discount to NAV
from 30% to 50%. This reflects increased uncertainty from the political
environment in the state of Uttar Pradesh, where JPIN holds all its land bank
and road assets. We maintain our Neutral rating and prefer Prestige Estates
(PEPL IN, Rs110.65, Outperform, TP: Rs210.00), Sobha Developers (SOBHA
IN, Rs233.60, Outperform, TP: Rs430.00), HDIL Housing Development and
Infrastructure (HDIL IN, Rs117.30, Outperform, TP: Rs230.00) and DLF
(DLFU IN, Rs200.90, Outperform, TP: Rs302.00) in the sector.
Impact
Sales momentum likely to take a hit: Sales momentum had already started
to slow in the last 3 quarters. We remain concerned about the sustainability of
the residential market sales run-rate across the NCR (National Capital
Region). The overhang is caused by shadow inventory held by speculators
that contributed 35-70% of sales in individual projects in FY10 and FY11.
We therefore continue to expect primary market run-rates to decline by at
least 20% in FY12/13. We think this is likely to be driven by satisfaction of
latent demand and rising borrowing costs. This is likely to be exacerbated by
competition from the secondary market as speculators look to exit property
bought in FY10 and FY11. In the near term, we also highlight the possibility of
delays in land acquisition, execution and the impact on buyer confidence
caused by news flow related to the political environment in the state.
Margin pressure possible on built-up units: Cost inflation and product mix
are likely to affect margins. This is because pricing power has been affected
by competition from the secondary market as speculators have exited
completed and half-built inventory, which is more attractive than newly
launched projects.
Earnings and target price revision
No change to our NAV and earnings estimates. We have increased our target
NAV discount from 30% to 50% and cut our target price to Rs43 from Rs63.
Price catalyst
12-month price target: Rs43.00 based on a Sum of Parts methodology.
Catalyst: Sales volume and price trend in the NCR over next 6-12 months.
Action and recommendation
JPIN is trading at a 54% discount to our NAV estimate. This discount is
primarily due to noise related to farmer protests against land acquisition and
litigation related to land parcels near the Yamuna expressway project and
JPIN’s real estate land parcels. Under a normalised scenario, we would
expect this stock to trade at a 20-30% NAV discount. However, in the
prevailing scenario, we expect the stock to remain volatile. We think a 50%
discount seems more appropriate until the political noise dies down. This may
happen closer to the state elections in May 2012, in our view.
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Jaypee Infratech
Wait for better timing
Event
Jaypee Infratech (JPIN) released 1Q FY12 results today. PAT was 6% below
our forecast due to weaker-than-expected sales. Our earnings estimates and
NAV are unchanged. However, we have increased our target discount to NAV
from 30% to 50%. This reflects increased uncertainty from the political
environment in the state of Uttar Pradesh, where JPIN holds all its land bank
and road assets. We maintain our Neutral rating and prefer Prestige Estates
(PEPL IN, Rs110.65, Outperform, TP: Rs210.00), Sobha Developers (SOBHA
IN, Rs233.60, Outperform, TP: Rs430.00), HDIL Housing Development and
Infrastructure (HDIL IN, Rs117.30, Outperform, TP: Rs230.00) and DLF
(DLFU IN, Rs200.90, Outperform, TP: Rs302.00) in the sector.
Impact
Sales momentum likely to take a hit: Sales momentum had already started
to slow in the last 3 quarters. We remain concerned about the sustainability of
the residential market sales run-rate across the NCR (National Capital
Region). The overhang is caused by shadow inventory held by speculators
that contributed 35-70% of sales in individual projects in FY10 and FY11.
We therefore continue to expect primary market run-rates to decline by at
least 20% in FY12/13. We think this is likely to be driven by satisfaction of
latent demand and rising borrowing costs. This is likely to be exacerbated by
competition from the secondary market as speculators look to exit property
bought in FY10 and FY11. In the near term, we also highlight the possibility of
delays in land acquisition, execution and the impact on buyer confidence
caused by news flow related to the political environment in the state.
Margin pressure possible on built-up units: Cost inflation and product mix
are likely to affect margins. This is because pricing power has been affected
by competition from the secondary market as speculators have exited
completed and half-built inventory, which is more attractive than newly
launched projects.
Earnings and target price revision
No change to our NAV and earnings estimates. We have increased our target
NAV discount from 30% to 50% and cut our target price to Rs43 from Rs63.
Price catalyst
12-month price target: Rs43.00 based on a Sum of Parts methodology.
Catalyst: Sales volume and price trend in the NCR over next 6-12 months.
Action and recommendation
JPIN is trading at a 54% discount to our NAV estimate. This discount is
primarily due to noise related to farmer protests against land acquisition and
litigation related to land parcels near the Yamuna expressway project and
JPIN’s real estate land parcels. Under a normalised scenario, we would
expect this stock to trade at a 20-30% NAV discount. However, in the
prevailing scenario, we expect the stock to remain volatile. We think a 50%
discount seems more appropriate until the political noise dies down. This may
happen closer to the state elections in May 2012, in our view.
15 May 2011
Jaypee Infratech -4Q11 comes in below expectations. Toll road project delayed given land acquisition issues :: JP Morgan
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Jaypee Infratech
Overweight
JYPE.BO, JPIN IN
4Q11 comes in below expectations. Toll road project
delayed given land acquisition issues
• 4Q11 results- JPIN reported 4Q11net income of Rs 2.5B (-34% Q/Q,
182% Y/Y) below our estimate of Rs 3.2B. The earnings miss was
primarily driven by lower than expected EBITDA margins of 46% (vs.
72% run rate for 9MFY11). This was on account of higher contribution of
built up property vs. plotted sales. Tax rate during the Q was also higher at
25%. During the Q, JPIN reported a dividend of Rs 0.5, taking the full
year dividend to Rs 1.25 (yield 2.2%). Full year revenues and PAT
improved 34%/194% respectively.
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Jaypee Infratech
Overweight
JYPE.BO, JPIN IN
4Q11 comes in below expectations. Toll road project
delayed given land acquisition issues
• 4Q11 results- JPIN reported 4Q11net income of Rs 2.5B (-34% Q/Q,
182% Y/Y) below our estimate of Rs 3.2B. The earnings miss was
primarily driven by lower than expected EBITDA margins of 46% (vs.
72% run rate for 9MFY11). This was on account of higher contribution of
built up property vs. plotted sales. Tax rate during the Q was also higher at
25%. During the Q, JPIN reported a dividend of Rs 0.5, taking the full
year dividend to Rs 1.25 (yield 2.2%). Full year revenues and PAT
improved 34%/194% respectively.
JP Infratech: Robust sales; project cost up : CLSA
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Robust sales; project cost up
JP Infratech’s 4QFY11 earnings were inline with expectations as
execution on constructed property business picks up. Sales, at 2.6m sf for
the quarter were slightly ahead as sales held well despite pricing gains of
c.15%. 20% inflation in Yamuna expressway project cost came as a
negative surprise and has let to a NAV cut of 6%. Customer collections
meanwhile are robust and at 53% discount to NAV and 5x FY12 earnings,
stock is attractive. Maintain BUY.
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Robust sales; project cost up
JP Infratech’s 4QFY11 earnings were inline with expectations as
execution on constructed property business picks up. Sales, at 2.6m sf for
the quarter were slightly ahead as sales held well despite pricing gains of
c.15%. 20% inflation in Yamuna expressway project cost came as a
negative surprise and has let to a NAV cut of 6%. Customer collections
meanwhile are robust and at 53% discount to NAV and 5x FY12 earnings,
stock is attractive. Maintain BUY.
04 April 2011
Buy Jaypee Infratech - unique mix of annuity and development assets; Edelweiss
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Jaypee Infratech (JPIN IN, INR 61, Buy)
n Large low-cost land bank, backed by a strong brand equity
Jaypee Infratech (JPIN) is constructing the Yamuna Expressway (YE) project, a six-lane 165 km road connecting Noida to Agra, which we expect to become operational by Q1FY13. As compensation for constructing YE, JPIN has rights to collect toll for 36 years on YE and holds development rights on 6,175 acres of land (saleable area of 530 msf, of which, ~311 msf is located in the NCR), across five contiguous land parcels along YE, acquired at a low cost of INR 32-40/sf. The large low-cost land bank has enabled JPIN to compete effectively with its peers in Noida and is supported by the Jaypee Group’s established presence.
n Flexible product/pricing strategy maximises cash flows
Unlike most developers who follow an inflexible pricing policy at the cost of volumes, JPIN has adopted a flexible pricing model that maximises volumes and cash flows. With unit sizes varying from 535-2,300 sf and ticket sizes in the range of INR 1.8-7.8 mn, the company has been able to achieve cumulative sales volumes of ~31.1 msf worth INR 92.3 bn as of December 2010 from the Noida land parcel , of which, the company has received ~INR 41.3 bn.
n Strong cash collections in FY11-13E; debt peaking in FY11
We expect JPIN to sell ~36 msf over FY11-13E for an aggregate transaction value of ~INR 111 bn. As a result, we expect JPIN to realise INR 49.9 bn of net cash flows (post-taxes) from real estate business over the same period. With YE nearing completion, JPIN is towards the end of its capex program and we expect JPIN’s debt to reduce with net D/E of 0.5x by FY13E against 2.0x in FY10.
n Outlook and valuations: Cash flows key; initiate coverage with ‘BUY’
Our FY12E GAV of INR 82/share consists of INR 75/share for real estate business and FCFE of INR 7/share for YE and Noida-Greater Noida expressway. Adjusted for FY12E net debt in real estate, we arrive at a NAV of INR 80/share. Though dependence on Noida for cash flows and delay in completion of YE are key risks over FY12, we believe commissioning of YE and generation of real estate sales volumes from Greater Noida/Agra land parcels in FY12 will act as key triggers. At CMP of INR 61/share, the stock trades at 24% discount to our NAV of INR 80/share. We initiate coverage on the stock with ‘BUY/SP’ rating.
03 April 2011
Jaypee Infratech - Cash engine :Target: Rs80: JP Morgan
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Jaypee Infratech
Initiation
Overweight
JYPE.BO, JPIN IN
Cash engine
Jaypee Infratech (JPIN) offers an attractive risk-reward profile, in our
view. The stock is trading at an EV/psf (implied land cost) of Rs190,
below estimated replacement cost. The company has a forward cash flow
yield (FCFE) of 13%, and one of the best sector ROEs (+25%). With work
on the toll road largely done and low-cost land locked in, we believe the
company will become the cash cow in JPA’s portfolio. This raises the
possibility of JPIN returning capital to the parentco (83% shareholder) via
dividends (FY12E yield of 5%). Initiate with OW, Mar-12 PT of Rs80,
in line with our DCF-based sum of the parts, which values cash flows for
next five years and remaining land at average of Rs270 psf.
• Key share price catalysts are largely 2H-weighted and relate to 1)
start of toll collection in 4Q12, 2) announcements of dividends by
JPIN (maiden DPU of Rs0.75 announced in 3Q10), 3) launch of two
additional land parcels (Agra, GB Nagar), and 4) opening of a Formula
One racetrack, (Oct-11). This should serve as a high profile brandbuilding
exercise for residential developments nearby.
• Noida growth – Is it real? Noida region offers quality infrastructure,
easy connectivity to Delhi, and affordable housing. However, sales
numbers emanating out of the market are high relative to the
population base of the city or history. Level of construction in the area
is commensurate with the creation of a virtually new megapolis. Each
of JPIN’s 1,000 acre+ parcels along the expressway is a mini-city in
itself. The true test of this market/model may come up in FY12/13
when big deliveries start to happen. Until then fundamental concerns
about the market may weigh on the stock.
• Political risks could come to the fore around mid2012, even as
controversies surrounding the YE project seem to be subsiding. We
note that now there is a Supreme Court verdict as well which has
validated land acquisition by JPIN. The project also had received an
approval from the principal opposition party (SP) in 2007. However
there are still some protests around the project and certain
environmental issues still need to be resolved for a few parcels.
Key share price catalysts
Over the next one year we see six key fundamental share price catalysts. These are
1. Commencement of Yamuna Expressway (expected by 3QCY11).
2. Guidance on dividend payment: After recording its maiden interim
dividend of 0.75p, we do expect JPIN to start returning more cash to
parentco (and investors) via dividends. Any positive guidance (30-40%
payout) or increase in the same in FY12 would be a positive.
3. Start of Formula 1 race (Oct -11) in Noida (First time in India): This
should serve as a high-profile brand building exercise for Jaypee group and
have a knock-on effect on nearby residential developments.
4. Auctions in Noida market: Noida RE market is witnessing a number of
auctions and transactions around the region should help set a benchmark
(atleast for parcel 1) for JPIN. The latest transaction in Noida was by Wave
group (for Rs70B) done at almost Rs180MM/acre and Logix group (for
Rs10B) for Rs150MM/acre.
5. Response to the planned launches at parcel 3 in Gautam Buddha Nagar.
Company expects the same to be launched around by 2QCY11.
Key risks to our view
1. Political news flow - A new political combination at the helm in mid-2012
could start creating some overhang. Yamuna Expressway project has seen
significant delays since its inception (in 2003) given farmer protests over
land acquisition, environmental issues and political opposition. Most of the
land acquisition/work on the project has been completed under the current
UP government (BSP). The previous government (SP) too gave it clearance
in 2007, albeit after having blocked it for four years. There is however still
some political opposition (notably from BJP) to the project. This could
create an overhang around FY13 when Uttar Pradesh elections get
underway.
2. Noida – Is the “unreal” growth real? Noida/G Noida region offers quality
infrastructure, easy connectivity to Delhi, and affordable housing. However,
sales numbers emanating from the market are high relative to the population
base of the city or history. The level of construction in the area is
commensurate with the creation of a virtually new megapolis. Each of
Jaypee’s 1,000 acre+ parcels along the 165KM expressway is a mini-city in
itself. The true test of this market/ model may then come up in FY12/13
when big deliveries start to happen. Noida’s big leap into a bustling city
may well happen at a faster pace than Gurgaon but will still take some time.
Until such time, fundamental concerns about the market may weigh on the
stock.
3. Percieved non-accretive acquisitions by the company from the parentco
potentially at a later stage: We note that JPA (parentco) also has an
interest in high-end real estate (in Noida/ G Noida) and via Sports city
venture (2500 acres). JPIN over time is expected to become the main
vehicle for executing RE projects for the group. This raises the possibility of
the company buying out assets from the parent. If such a buyout were to
occur at a price higher than the “perceived market rate” it could create an
overhang.
4. A big part of our Overweight thesis is that JPIN will become the cash cow
in JPA’s portfolio and will possibly start returning capital to the parentco
via dividends. If such dividends are lower than expected (Rs3/share in
FY12) due to lower payout ratios, it could lead to accumulation of nonperforming
cash assets on the B/S and question our dividend yield
argument.
5. Low free float at 17% - JPA still holds 83% of the company and over time
needs to bring its float down to 75% ( to comply with SEBI listing norms).
This creates a dilution overhang and also the potential usage of new capital
(since capex on core business is largely done).
Attractive risk-reward ratio: Trading at EV psf of sub Rs200,
+20% ROE, high dividend payout, and 13% cash flow yield
JPIN’s valuations are at compelling levels, in our view, and we believe the stock
offers an attractive risk-reward profile from here. The company satisfies most of the
criteria that we would define for a value pick, i.e.:
1. Trading below replacement cost: The company is currently trading at an
EV/psf of land at Rs190 (for converted land), significantly below
replacement cost. At a 1.5-2x FSI this translates into a land cost of
Rs15MM/Acre. Land in similarly priced locations in NCR is available for
>Rs500psf (e.g. New Gurgaon) or Rs30MM/Acre. Over and above this, the
developers also have to incur conversion charges of Rs150-200 psf. JPIN’s
land is completely aggregated (where premiums are very high) and use
conversions are in place.
2. High FCFE yield: Given that the investments from toll road are largely
done, JPIN should start becoming a massive FCF generator. We estimate
the company to start generating Rs11-12B in cash flow (after interest/tax),
which would put the stock at a 13% FCFE yield starting in FY12. At a 5-6x
forward P/E the stock looks reasonable.
3. Positive earnings surprise thus far and low P/E: The company has
surprised positively on earnings thus far (current FY11E consensus EPS of
Rs10.6 vs. Sep-10 levels of Rs7.5), and even on consensus estimates the
stock is trading at 6x forward earnings.
4. High level cash collections despite concerns on "broker" sales: A key
concern about the Noida market has been potentially high involvement of
broker underwriting inventory for RE developers. We note that JPIN’s cash
collections thus far have been very robust (Rs92B sold and Rs41B
collected). This suggests at least some level of end-user buying, as a US$1B
amount is pretty much above capabilities of multiple brokers to pay up.
5. High ROE (FY12 25%) and low gearing: The company is likely to finish
FY11 at an average ROE of 30% (FY12E 25% thanks to cheap land cost).
The company currently has net debt of Rs36B (0.7x Net D/E) which can be
easily serviced from toll annuities of Rs3B+ and cash collections from RE
development (Rs92B locked-in sales).
6. Possibility of high dividend payouts: With a large part of toll road capex
completed, JPIN will probably become one of the first high-dividend-payout
companies in the RE space (FY12E DPS of Rs3). Even if JPIN chooses to
retire a substantial part of debt in the near term, the payout ratios should
remain healthy (30-40%).
7. Strong contractor in parent: Execution thus far on toll road construction
is running ahead of schedule. JPA is a well known contractor, having built
large-scale power projects in the country. Thus far RE construction has been
on track. It also helps that most of the approvals for key land parcels are
already in place.
Cheap even on relative basis in a “beaten-down” sector
Comparing JPIN to other listed developers, despite a better ROE, operating cash flow
and positive earnings revisions (sector has seen negative revisions), the stock is
trading below peer group on P/E and EV/psf basis. The dividend yield of the
company is the highest across the space. On a P/BV basis, though, it is at a premium;
however, we believe a best-in-sector ROE more than compensates for this.
Free cash flow generator: JPIN should become the “cash
cow” in the group’s portfolio
With capex on the expressway largely completed (~95% already incurred) and the
majority (87%) of the land parcels for township projects already in place, JPIN is
well placed to throw up substantial operating cash surplus. We expect the company
to generate FCFE of Rs10-11B or Rs8 per share per annum aided by collections from
the real estate pre-sales (Rs92B achieved to date) and steady toll revenues (Rs3B+
from FY13) from Yamuna Expressway.
These cash flows will likely be used to:
1. Retire some debt – JPIN’s current net debt of Rs36B is primarily long-term
infrastructure debt with repayments starting in FY13 and amortizable over
the next 12-13 years (by 2025). Once the toll road starts, a large part of this
can be serviced by securitizing toll revenues, leaving core RE business
almost free of any debt. Nonetheless we expect to JPIN to reduce its gross
debt by Rs 10B over the next two years.
2. Repatriate capital to parentco via dividends: JPA holds 83% of JPIN and
JPIN is the cash cow of JP's portfolio. Therefore it is reasonable to assume
that the company could look to repatriate capital back to the parent co via
dividends. Assuming a 30% payout ratio (vs. management guidance of
50%) and Rs10 EPS, the annual dividends from the company could rise to
Rs3/share.
3. Buyout RE assets from the parentco: We note that JPA too has substantial
real estate assets (32 msf high end land in Noida and 2500 acre sports city
complex). Increasing cash flows in the core RE business in JPIN could then
be used to support a buyout of the RE business from JPA sometime later. In
such a scenario th evaluation of the assets will be critical.
We believe our estimates are conservative: Modeling 15%
booking decline in FY11 and approx 30% below guidance
JPIN’s focus on volumes has yielded impressive results. The company has achieved
bookings of over 31msf/Rs92B over the last two years from its Noida parcel (Jaypee
Greens Township). The average ticket size across Jaypee’s product offering is
Rs2.5M-6.5M and the average selling price is currently in the range of Rs3,000-
3,300 psf, one of the most affordable products available in NCR region.
The company has now achieved decent success in monetization of its Noida parcel 1
(Wishtown) launch (31msf of 78msf sold). However, incremental sales from this
township are likely to be limited as company expects realizations to increase once the
initial deliveries happen and Yamuna Expressway is fully operational.
Incrementally, sales are likely to pick up from Parcel 3 in Gautam Buddha Nagar.
Initial master planning for the same has already begun and is expected to be launched
by 1QFY12. The two parcels in Gautam Budha Nagar (parcel 2 & 3) are adjacent to
the JP Associate's (JAL) sports city project and overall plan is to develop an
integrated mixed use township of 5,000acres across the three parcels.
Our assumptions on incremental sales are conservative and much lower than
company targets. Against management expectations of Rs45B bookings and
FY11 bookings run rate of Rs37B, we are modeling in a 15% de-growth in FY12
(Rs 32B). This is on account of lower realizations from parcels 2 and 3 (Average
realizations taken at Rs 2300-2400 psf).
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Jaypee Infratech
Initiation
Overweight
JYPE.BO, JPIN IN
Cash engine
Jaypee Infratech (JPIN) offers an attractive risk-reward profile, in our
view. The stock is trading at an EV/psf (implied land cost) of Rs190,
below estimated replacement cost. The company has a forward cash flow
yield (FCFE) of 13%, and one of the best sector ROEs (+25%). With work
on the toll road largely done and low-cost land locked in, we believe the
company will become the cash cow in JPA’s portfolio. This raises the
possibility of JPIN returning capital to the parentco (83% shareholder) via
dividends (FY12E yield of 5%). Initiate with OW, Mar-12 PT of Rs80,
in line with our DCF-based sum of the parts, which values cash flows for
next five years and remaining land at average of Rs270 psf.
• Key share price catalysts are largely 2H-weighted and relate to 1)
start of toll collection in 4Q12, 2) announcements of dividends by
JPIN (maiden DPU of Rs0.75 announced in 3Q10), 3) launch of two
additional land parcels (Agra, GB Nagar), and 4) opening of a Formula
One racetrack, (Oct-11). This should serve as a high profile brandbuilding
exercise for residential developments nearby.
• Noida growth – Is it real? Noida region offers quality infrastructure,
easy connectivity to Delhi, and affordable housing. However, sales
numbers emanating out of the market are high relative to the
population base of the city or history. Level of construction in the area
is commensurate with the creation of a virtually new megapolis. Each
of JPIN’s 1,000 acre+ parcels along the expressway is a mini-city in
itself. The true test of this market/model may come up in FY12/13
when big deliveries start to happen. Until then fundamental concerns
about the market may weigh on the stock.
• Political risks could come to the fore around mid2012, even as
controversies surrounding the YE project seem to be subsiding. We
note that now there is a Supreme Court verdict as well which has
validated land acquisition by JPIN. The project also had received an
approval from the principal opposition party (SP) in 2007. However
there are still some protests around the project and certain
environmental issues still need to be resolved for a few parcels.
Key share price catalysts
Over the next one year we see six key fundamental share price catalysts. These are
1. Commencement of Yamuna Expressway (expected by 3QCY11).
2. Guidance on dividend payment: After recording its maiden interim
dividend of 0.75p, we do expect JPIN to start returning more cash to
parentco (and investors) via dividends. Any positive guidance (30-40%
payout) or increase in the same in FY12 would be a positive.
3. Start of Formula 1 race (Oct -11) in Noida (First time in India): This
should serve as a high-profile brand building exercise for Jaypee group and
have a knock-on effect on nearby residential developments.
4. Auctions in Noida market: Noida RE market is witnessing a number of
auctions and transactions around the region should help set a benchmark
(atleast for parcel 1) for JPIN. The latest transaction in Noida was by Wave
group (for Rs70B) done at almost Rs180MM/acre and Logix group (for
Rs10B) for Rs150MM/acre.
5. Response to the planned launches at parcel 3 in Gautam Buddha Nagar.
Company expects the same to be launched around by 2QCY11.
Key risks to our view
1. Political news flow - A new political combination at the helm in mid-2012
could start creating some overhang. Yamuna Expressway project has seen
significant delays since its inception (in 2003) given farmer protests over
land acquisition, environmental issues and political opposition. Most of the
land acquisition/work on the project has been completed under the current
UP government (BSP). The previous government (SP) too gave it clearance
in 2007, albeit after having blocked it for four years. There is however still
some political opposition (notably from BJP) to the project. This could
create an overhang around FY13 when Uttar Pradesh elections get
underway.
2. Noida – Is the “unreal” growth real? Noida/G Noida region offers quality
infrastructure, easy connectivity to Delhi, and affordable housing. However,
sales numbers emanating from the market are high relative to the population
base of the city or history. The level of construction in the area is
commensurate with the creation of a virtually new megapolis. Each of
Jaypee’s 1,000 acre+ parcels along the 165KM expressway is a mini-city in
itself. The true test of this market/ model may then come up in FY12/13
when big deliveries start to happen. Noida’s big leap into a bustling city
may well happen at a faster pace than Gurgaon but will still take some time.
Until such time, fundamental concerns about the market may weigh on the
stock.
3. Percieved non-accretive acquisitions by the company from the parentco
potentially at a later stage: We note that JPA (parentco) also has an
interest in high-end real estate (in Noida/ G Noida) and via Sports city
venture (2500 acres). JPIN over time is expected to become the main
vehicle for executing RE projects for the group. This raises the possibility of
the company buying out assets from the parent. If such a buyout were to
occur at a price higher than the “perceived market rate” it could create an
overhang.
4. A big part of our Overweight thesis is that JPIN will become the cash cow
in JPA’s portfolio and will possibly start returning capital to the parentco
via dividends. If such dividends are lower than expected (Rs3/share in
FY12) due to lower payout ratios, it could lead to accumulation of nonperforming
cash assets on the B/S and question our dividend yield
argument.
5. Low free float at 17% - JPA still holds 83% of the company and over time
needs to bring its float down to 75% ( to comply with SEBI listing norms).
This creates a dilution overhang and also the potential usage of new capital
(since capex on core business is largely done).
Attractive risk-reward ratio: Trading at EV psf of sub Rs200,
+20% ROE, high dividend payout, and 13% cash flow yield
JPIN’s valuations are at compelling levels, in our view, and we believe the stock
offers an attractive risk-reward profile from here. The company satisfies most of the
criteria that we would define for a value pick, i.e.:
1. Trading below replacement cost: The company is currently trading at an
EV/psf of land at Rs190 (for converted land), significantly below
replacement cost. At a 1.5-2x FSI this translates into a land cost of
Rs15MM/Acre. Land in similarly priced locations in NCR is available for
>Rs500psf (e.g. New Gurgaon) or Rs30MM/Acre. Over and above this, the
developers also have to incur conversion charges of Rs150-200 psf. JPIN’s
land is completely aggregated (where premiums are very high) and use
conversions are in place.
2. High FCFE yield: Given that the investments from toll road are largely
done, JPIN should start becoming a massive FCF generator. We estimate
the company to start generating Rs11-12B in cash flow (after interest/tax),
which would put the stock at a 13% FCFE yield starting in FY12. At a 5-6x
forward P/E the stock looks reasonable.
3. Positive earnings surprise thus far and low P/E: The company has
surprised positively on earnings thus far (current FY11E consensus EPS of
Rs10.6 vs. Sep-10 levels of Rs7.5), and even on consensus estimates the
stock is trading at 6x forward earnings.
4. High level cash collections despite concerns on "broker" sales: A key
concern about the Noida market has been potentially high involvement of
broker underwriting inventory for RE developers. We note that JPIN’s cash
collections thus far have been very robust (Rs92B sold and Rs41B
collected). This suggests at least some level of end-user buying, as a US$1B
amount is pretty much above capabilities of multiple brokers to pay up.
5. High ROE (FY12 25%) and low gearing: The company is likely to finish
FY11 at an average ROE of 30% (FY12E 25% thanks to cheap land cost).
The company currently has net debt of Rs36B (0.7x Net D/E) which can be
easily serviced from toll annuities of Rs3B+ and cash collections from RE
development (Rs92B locked-in sales).
6. Possibility of high dividend payouts: With a large part of toll road capex
completed, JPIN will probably become one of the first high-dividend-payout
companies in the RE space (FY12E DPS of Rs3). Even if JPIN chooses to
retire a substantial part of debt in the near term, the payout ratios should
remain healthy (30-40%).
7. Strong contractor in parent: Execution thus far on toll road construction
is running ahead of schedule. JPA is a well known contractor, having built
large-scale power projects in the country. Thus far RE construction has been
on track. It also helps that most of the approvals for key land parcels are
already in place.
Cheap even on relative basis in a “beaten-down” sector
Comparing JPIN to other listed developers, despite a better ROE, operating cash flow
and positive earnings revisions (sector has seen negative revisions), the stock is
trading below peer group on P/E and EV/psf basis. The dividend yield of the
company is the highest across the space. On a P/BV basis, though, it is at a premium;
however, we believe a best-in-sector ROE more than compensates for this.
Free cash flow generator: JPIN should become the “cash
cow” in the group’s portfolio
With capex on the expressway largely completed (~95% already incurred) and the
majority (87%) of the land parcels for township projects already in place, JPIN is
well placed to throw up substantial operating cash surplus. We expect the company
to generate FCFE of Rs10-11B or Rs8 per share per annum aided by collections from
the real estate pre-sales (Rs92B achieved to date) and steady toll revenues (Rs3B+
from FY13) from Yamuna Expressway.
These cash flows will likely be used to:
1. Retire some debt – JPIN’s current net debt of Rs36B is primarily long-term
infrastructure debt with repayments starting in FY13 and amortizable over
the next 12-13 years (by 2025). Once the toll road starts, a large part of this
can be serviced by securitizing toll revenues, leaving core RE business
almost free of any debt. Nonetheless we expect to JPIN to reduce its gross
debt by Rs 10B over the next two years.
2. Repatriate capital to parentco via dividends: JPA holds 83% of JPIN and
JPIN is the cash cow of JP's portfolio. Therefore it is reasonable to assume
that the company could look to repatriate capital back to the parent co via
dividends. Assuming a 30% payout ratio (vs. management guidance of
50%) and Rs10 EPS, the annual dividends from the company could rise to
Rs3/share.
3. Buyout RE assets from the parentco: We note that JPA too has substantial
real estate assets (32 msf high end land in Noida and 2500 acre sports city
complex). Increasing cash flows in the core RE business in JPIN could then
be used to support a buyout of the RE business from JPA sometime later. In
such a scenario th evaluation of the assets will be critical.
We believe our estimates are conservative: Modeling 15%
booking decline in FY11 and approx 30% below guidance
JPIN’s focus on volumes has yielded impressive results. The company has achieved
bookings of over 31msf/Rs92B over the last two years from its Noida parcel (Jaypee
Greens Township). The average ticket size across Jaypee’s product offering is
Rs2.5M-6.5M and the average selling price is currently in the range of Rs3,000-
3,300 psf, one of the most affordable products available in NCR region.
The company has now achieved decent success in monetization of its Noida parcel 1
(Wishtown) launch (31msf of 78msf sold). However, incremental sales from this
township are likely to be limited as company expects realizations to increase once the
initial deliveries happen and Yamuna Expressway is fully operational.
Incrementally, sales are likely to pick up from Parcel 3 in Gautam Buddha Nagar.
Initial master planning for the same has already begun and is expected to be launched
by 1QFY12. The two parcels in Gautam Budha Nagar (parcel 2 & 3) are adjacent to
the JP Associate's (JAL) sports city project and overall plan is to develop an
integrated mixed use township of 5,000acres across the three parcels.
Our assumptions on incremental sales are conservative and much lower than
company targets. Against management expectations of Rs45B bookings and
FY11 bookings run rate of Rs37B, we are modeling in a 15% de-growth in FY12
(Rs 32B). This is on account of lower realizations from parcels 2 and 3 (Average
realizations taken at Rs 2300-2400 psf).
17 February 2011
Goldman Sachs:: Jaypee Infratech: Execution vs OCF yield
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Jaypee Infratech (JYPE.BO; Neutral): Execution vs OCF yield
Investment view
We initiate coverage on Jaypee Infratech (JIL) with a Neutral rating and
a 12-month target price of Rs78.
In our view, the following key revenue drivers appear robust:
Large pre-sales. Has sold 31 mn sqft of residential real estate with
cumulative value of Rs96 bn over past six quarters. This provides good
visibility on residential revenue booking, which we estimate at Rs118
bn over FY10-FY13E. We like JIL’s volume-driven strategy, but it also
entails significant ramp-up in execution capability and we believe
delays could affect marketability of future residential launches.
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Jaypee Infratech (JYPE.BO; Neutral): Execution vs OCF yield
Investment view
We initiate coverage on Jaypee Infratech (JIL) with a Neutral rating and
a 12-month target price of Rs78.
In our view, the following key revenue drivers appear robust:
Large pre-sales. Has sold 31 mn sqft of residential real estate with
cumulative value of Rs96 bn over past six quarters. This provides good
visibility on residential revenue booking, which we estimate at Rs118
bn over FY10-FY13E. We like JIL’s volume-driven strategy, but it also
entails significant ramp-up in execution capability and we believe
delays could affect marketability of future residential launches.
15 February 2011
JAYPEE INFRATECH :: IDFC Emerging Stars Conference
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JAYPEE INFRATECH
OUTPERFORMER (RS56, MCAP: RS7.8BN / US$170M)
• Jaypee Infratech (JIL) is a unique play on the infrastructure and real estate space via a single entity.
• JIL has achieved significant progress on the construction of the Yamuna Expressway in the past two years; more than
93% of the cost has been incurred (Rs93bn) and the project is nearing completion (>85% complete).
o In 9MFY11, JIL spent more than Rs25bn on the construction
o It plans to open the expressway to the public by July 2011, with toll revenues expected from October 2011.
o No further farmer protests over land acquisition have been reported since September 2010.
• In real estate, JIL has been able to achieve record volumes in the past two years despite launches having been
restricted to Noida.
o JIL has sold more than 31msf in Noida with a sales value of Rs96bn (average realization, 3,300psf) and received
more than Rs41bn in advances (>43% of sales).
o While NCR remains a predominant investor-driven market, JIL’s collection of more than 40% in advances clearly
indicate preference for the Jaypee brand in Noida as also presence of significant end-user interest.
• In 9MFY11, JIL sold 9.83msf with a sales value of ~Rs96bn (average realization of >Rs3,100psf).
• JIL is planning its Greater Noida launch in the next couple of months, while the Agra launch is expected in H1FY12.
The company wants to maintain an annual sales run rate of 12-15msf, with Noida contributing 4-6msf and Greater
Noida and Agra the rest.
• The stock has corrected ~19% in the past month and ~38% since listing (Rs102). Our Mar-12 NAV stands at Rs132 per
share with a price target of Rs105 (20% discount to NAV).
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JAYPEE INFRATECH
OUTPERFORMER (RS56, MCAP: RS7.8BN / US$170M)
• Jaypee Infratech (JIL) is a unique play on the infrastructure and real estate space via a single entity.
• JIL has achieved significant progress on the construction of the Yamuna Expressway in the past two years; more than
93% of the cost has been incurred (Rs93bn) and the project is nearing completion (>85% complete).
o In 9MFY11, JIL spent more than Rs25bn on the construction
o It plans to open the expressway to the public by July 2011, with toll revenues expected from October 2011.
o No further farmer protests over land acquisition have been reported since September 2010.
• In real estate, JIL has been able to achieve record volumes in the past two years despite launches having been
restricted to Noida.
o JIL has sold more than 31msf in Noida with a sales value of Rs96bn (average realization, 3,300psf) and received
more than Rs41bn in advances (>43% of sales).
o While NCR remains a predominant investor-driven market, JIL’s collection of more than 40% in advances clearly
indicate preference for the Jaypee brand in Noida as also presence of significant end-user interest.
• In 9MFY11, JIL sold 9.83msf with a sales value of ~Rs96bn (average realization of >Rs3,100psf).
• JIL is planning its Greater Noida launch in the next couple of months, while the Agra launch is expected in H1FY12.
The company wants to maintain an annual sales run rate of 12-15msf, with Noida contributing 4-6msf and Greater
Noida and Agra the rest.
• The stock has corrected ~19% in the past month and ~38% since listing (Rs102). Our Mar-12 NAV stands at Rs132 per
share with a price target of Rs105 (20% discount to NAV).
25 January 2011
BofA Merrill Lynch: Jaypee Infratech- Strong execution, Buy
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Jaypee Infratech
Strong execution, Reiterate Buy
„3Q earnings ahead of estimate
Jaypee Infratech reported strong 3Q earnings of Rs3.8bn, 50% ahead of our
estimate on positive surprise from better execution and recognition of Rs1bn from
plots. We have increased our FY11 earnings by 20% to factor in better than
expected 3Q results. We reiterate our Buy rating with PO of Rs104, offering 44%
potential upside as the key triggers- commissioning of Yamuna Expressway and
launch of 2nd land parcel for sale is expected to play out over next 6-9months.
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Jaypee Infratech
Strong execution, Reiterate Buy
„3Q earnings ahead of estimate
Jaypee Infratech reported strong 3Q earnings of Rs3.8bn, 50% ahead of our
estimate on positive surprise from better execution and recognition of Rs1bn from
plots. We have increased our FY11 earnings by 20% to factor in better than
expected 3Q results. We reiterate our Buy rating with PO of Rs104, offering 44%
potential upside as the key triggers- commissioning of Yamuna Expressway and
launch of 2nd land parcel for sale is expected to play out over next 6-9months.
12 November 2010
Jaypee Infratech-Analyst Meeting Highlights: Morgan Stanley
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Jaypee Infratech Limited
Analyst Meeting Highlights:
Optimistic About 2011
Quick Comment: We attended Jaiprakash Group’s
analyst day. The management team prominently
discussed Jaypree Infratech (JIL, 83%-owned
subsidiary of Jaiprakash Associates).
Central message – JIL management appeared
optimistic about business prospects in 2011: They
cited the likely commissioning of JIL’s 165-km long
Yamuna Expressway (Noida to Agra) in June-July 2011
and preparedness to host India’s maiden Formula One
race in October 2011. JIL targets Rs25 bln sales in F11,
which could scale up to Rs100 bln in the next five years.
02 November 2010
Jaypee Infratech: Strong 2Q, execution on track -Buy :: BofA ML
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Jaypee Infratech
Strong 2Q, execution on track
- Reiterate Buy
Strong results, Reiterate Buy
Jaypee Infratech reported strong 2Q results with earnings at Rs4.1bn, double our
estimate. JIL has recognized most of the revenues from the plotted sales in
1HFY11 against our estimation of 12-18months leading to the outperformance.
We have adjusted our FY11 (increased by 17%) and FY12 estimates to factor in
full recognition of plotted sales this fiscal. We reiterate our Buy rating with
potential upside of 16%. The launch of 2nd parcel in NCR and approval for airport
on the expressway should be key triggers for the stock in the next 6 months.
Expressway execution spot on
The execution for the expressway is on track and management reiterated its
guidance of completing the project by FY11. We currently built in toll revenues
from Dec 2011 and see upside risk to our estimate. The execution did get
impacted during the recent agitation by farmers, but now the work is back on full
swing. In 2Q alone JPI has spent incremental capex of Rs12bn on expressway,
with final surface laying completed for 44% of the road up from 38% in 1Q.
Noida sales strong, launch on parcel 2 is the key
The sales continue to be strong in Noida project with pre sales of 6.7mn sq ft in
1HFY11 with ASP of Rs3361/sq ft in line to meet our estimate of 15mn sq ft. JIL is
planning to launch the residential project at 2nd parcel in 3Q. The good response
for the project will be a key for the stock as the parcel contributes 25% to our NAV
and will improve cash flow visibility beyond Noida project.
Noida resi prices – scope for upside
We believe the residential prices in Noida have a strong case to outperform
Gurgaon in next 12-18months as currently Noida residential prices are at 25-40%
discount to Gurgaon. While Gurgaon has seen price increases of 30-35% in last
12 months, Noida has been more stable moving up by just 10-15%.
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