Jaiprakash Associates - Results - a mixed bag - Prabhudas Lilladher

- Q4FY13 - a better show in sales QoQ on all fronts: Cement and EPC business revenues were up by 11% and 20% QoQ; however, YoY down by 3% and 13.4%, respectively. Real Estate revenues were flat QoQ but grew by 14.3% on a YoY basis. Overall, net revenues for JPA in Q4FY13 stood at Rs38.6bn, registering a de-growth of 4%. Despatches in Q4FY13 de-grew by 4.6% YoY to 4mt. Realisations at Rs4,091/tonne were up 1.7% YoY. For FY13, revenues were up by 3% YoY and PAT plunged by a 51.2%.

- Growth in Cement EBIT/tonne, Construction margins inching to normalcy: Cement margins managed to improve by 110bps YoY for Q4FY13 due to cost control measures and better realisations. For FY13, the margins remained flat at 11.6%. Construction, on account of lower sales, reported a 400bps YoY decline in margins for Q4FY13 and 150bps decline for FY13. Real estate margins at 34.7% in FY13 were down from 46.9% in FY12.

- Interest costs mainly in control, depreciation costs higher: Interest cost declined by 5.3% YoY in Q4FY13 but grew by 3.8% QoQ. For FY13, the interest cost was up by 13%. Depreciation costs increased by 18.2% in FY13 on the back of 13% increase in fixed assets. Current debt stands at Rs230bn (approx.). LT loans increased by 23% YoY to Rs189bn. NWC rose by 6.3% YoY or Rs7.6bn on account of higher loans & advances and receivables.

- Updates: JPA is targeting to pare down the debt by Rs20-30bn through stake sale in Gujarat cement plant and land parcels in NCR region. The company is also planning an investment holiday in the coming year.

- Valuation & Recommendations: We have reduced our FY14/15 PAT estimates on the back of lower cement sales and low margins, taking into account the current slack in the cement sector. For JPA, the overhang remains in terms of higher debt. However, a potential stake sale in JCL is expected to re-rate the stock. We maintain 'Accumulate' on the stock.

Source : Equity Bulls

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