Jaiprakash Associates - 4QFY2013 Result Update - Angel Broking

For 4QFY2013, Jaiprakash Associates (JAL) posted a mixed set of numbers. The performance on the revenue front was above our estimate; however earnings were lower than our estimate, owing to lower-than-expected operating performance and high interest cost. The performance on the revenue front was owing to real estate revenue surprise. However, lower-than-expected performance of the cement (3.0% yoy decline) and construction segment (13.4% yoy decline) led to a decline in the blended EBITDAM.

Execution improves, operating margins disappoint: On the top-line front, JAL reported a revenue of Rs. 3,907cr in 4QFY2013 (against our estimate of Rs. 3,365cr), indicating a decline of 3.8% yoy. The real estate segment grew 14.3% on a yoy basis, however cement and construction segment revenues declined by 3.0% and 13.4% respectively on yoy basis. The blended EBITDA margin declined by 222bp/424bp on a yoy/qoq basis to 22.9% in 4QFY2013 which was below our estimate of 26.4%. Interest cost increased by 3.1% on a sequential basis to Rs. 549cr and was higher than our estimate by 2.8%. The depreciation cost came in at Rs. 191cr for 4QFY2013, a jump of 16.5%/5.2% on a yoy/qoq basis. On the bottom-line front, the company reported a PAT of Rs. 124cr in 4QFY2013, registering a decline of 56.5% yoy owing to lower-than-expected performance at the operating level and high interest cost.

Outlook and valuation: Going forward, we believe deleveraging the balance sheet through monetization of land parcel and stake sale in cement business would help the company in reducing 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. 90.

Source : Equity Bulls

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