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Jaiprakash Associates 3QFY2012 performance highlights and results update

Contributed by Angel Broking

For 3QFY2012, Jaiprakash Associates (JAL) reported in-line performance on the revenue front but better-than-expected numbers on the EBITDAM and PAT level. This outperformance was owing to high margin in construction segment (owing to last leg of payment for completion of Yamuna expressway) and higher other income (on account of dividend from subsidiaries). We recommend Buy on the stock.

Revenue in line; Higher EBITDAM and other income results in earnings outperformance: On the top-line front, the company’s revenue increased by 12.1% on a yoy basis to Rs.3,305cr, which was exactly as per our estimate. The cement segment reported growth of 37.2% yoy; however, construction and real estate revenue declined by 1.7% and 27.6%, respectively, on a yoy basis. Blended EBITDA margin came in at 24.7%, down 400bp yoy and ahead of our expectation of 21.2%. The construction and real estate segments, with EBIT margins of 29.8% and 47.9%, respectively, led to good show on the margin front. Interest cost stood at Rs.448.5cr, up 32.6% yoy 10.8% qoq and marginally higher than our estimate of Rs.425.1cr. Depreciation cost came in at Rs.202.2cr, up 31.1% yoy and 14.8% qoq and higher than our estimate of Rs.184.9cr. The bottom line came in at Rs.205.0cr, a decline of 11.9% yoy and higher than our estimate of Rs.69.5cr due to high other income. Other income during the quarter jumped from Rs.3.0cr in 3QFY2011 to Rs.120.1cr in 3QFY2012.

Outlook and valuation: We have valued JAL’s cement and construction business at 6x EV/EBITDA – (Rs.62.2/share) and (Rs.31.2/share), respectively. We have valued its power and real estate businesses on mcap basis (giving 15% holding company discount), which contributes Rs.66.1/share to our target price. The hotel segment contributes Rs.0.8/share. Treasury shares (Rs.7.7/share) have been valued at the current market price, whereas net debt is accounted for on a per share basis in our valuation at Rs.68.6. We recommend our Buy rating on the stock with a revised SOTP target price of Rs.99 (Rs.88), implying an upside of 15.8% from current levels.