JP Associates - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Jaiprakash Associates (JAL) reported mixed set of numbers with subdued revenue performance but higher-than-expected numbers on EBITDAM and PAT level. Decline in real estate (52.4%) and construction (4.6%) segment resulted in muted performance on revenue front. However, strong construction margin resulted in higher EBITDA.

Despite lower revenue, higher EBITDAM and lower interest cost result in higher than expected earnings: On the top-line front, company's revenues grew by 3.1% on yoy basis to Rs.3,008cr which was lower than our estimate of Rs.3,534cr. This muted performance was on account of decline in construction and real estate segment by 4.6% and 52.4% respectively on yoy basis. However, the cement segment reported healthy yoy growth of 21.8%. Blended EBITDA margins came in at 27.1% an improvement of 100bp on yoy basis and ahead of our expectation of 24.0%. Construction margins of 29.6% led to good show on the margins front. Interest cost stood at Rs.465cr an increase of 21.3% on yoy basis but fall of 19.8% on a sequential basis. Depreciation cost came at Rs.176cr a jump of 24.8% on yoy basis. Bottom-line came at Rs.139cr a dip of 24.6% on yoy basis but higher than our estimate due to better EBITDAM and lower 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 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 on the stock with an SOTP target price of Rs.91.

Source : Equity Bulls

Keywords