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Jaiprakash Associates 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Jaiprakash Associates (JAL) posted a mixed set of numbers. The performance on the revenue front was strong but earnings were lower than our estimate, owing to lower-than-expected operating performance. The strong performance on the revenue front was owing to real estate revenue surprise. However, lower-than-expected cement realisation and subdued performance of the construction segment led to decline in blended EBITDAM.

Strong revenue performance offset by margin contraction: On the top-line front, the company reported a revenue of Rs.3,431cr in 3QFY2013, registering a growth of 15.5% yoy, which was higher than our estimate by 4.3%. The cement segment grew by 7% on a yoy basis while the construction segment and the real estate segment’s revenue grew by 2.7% and 98.9% on a yoy basis respectively. The blended EBITDA margin came in at 23.2% in 3QFY2013 indicating a decline of 603bp/395bp on a yoy/qoq basis and was below our estimate of 25.9%. Interest cost stood at Rs.533cr a jump of 20.7%/14.7% on yoy/qoq basis and was higher than our estimate by 11%. Depreciation cost came in at Rs.181cr, a jump of 9.9% on a yoy basis. On the bottom-line front, the company reported a PAT Rs.111cr, a dip of 64.2% yoy, owing to lower-than-expected performance at the operating level and high interest cost.

Outlook and valuation: JAL had demerged its cement operations in Andhra Pradesh (5 mtpa) and Gujarat (4.8 mtpa) into a separate entity with a plan to divest stake. This stake sale is part of the company’s strategy to reduce its huge debt, which continues to remain an overhang on the stock. Hence closure of such a deal would be positive for the company. We recommend Buy rating on the stock with a SOTP target price of Rs.97.