Jaiprakash Associates 3QFY2014 performance highlights and results update
February 13, 2014, Thursday, 05:29 GMT | 00:29 EST | 10:59 IST | 13:29 SGT
For 3QFY2014, Jaiprakash Associates (JAL) posted a mixed set of numbers. The performance on the revenue front was subdued while earnings were lower than our estimate owing to lower-than-expected operating performance and high interest cost (up 41.1% yoy). The subdued performance on the revenue front was mainly due to poor performance of the Cement segment. This along with a high interest cost led to a loss at the earning levels.
High interest cost a cause of worry: On the top-line front, the company reported a revenue of Rs.3,164cr for 3QFY2014, registering a decline of 7.8% yoy which is lower than our estimate by 4.4%. The Construction segment posted a healthy growth of 14.4% yoy; however the Cement and Real Estate segments’ revenue declined by 7.0% and 58.5% on a yoy basis respectively. The Blended EBITDA margin increased by 37bp yoy to 23.5% and was below our expectation of 26.1%. This was mainly due to lower margins in the Cement (2.0%) segment. Interest cost stood at Rs.752cr a jump of 41.1%/14.9% on a yoy/qoq basis and was higher than our estimate of Rs.600cr. Depreciation cost came in at Rs.197cr, a jump of 8.6% on a yoy basis. On the bottom-line front, the company reported a loss of Rs.89cr for the quarter as compared to a profit of Rs.111cr in 3QFY2013. This is mainly due to a lower-than-expected operating performance and high interest cost.
Outlook and valuation: We believe the deal of 4.8mn tonne cement asset sale to UltraTech Cement is the first step in the right direction and brings in a much needed relief to the company as it would help reduce its debt. The Management has guided to reduce its consolidated debt by ~Rs.15,000cr through monetization of its land parcel, cement business, and thermal & hydro assets. Going forward, we believe deleveraging the balance sheet through monetization of assets would help reduce the huge debt which continues to remain an overhang on the stock. Hence closure of such a deal would be positive for the company. However, we continue to maintain our Neutral rating on the stock.