Maintain Buy on Jaiprakash Associates - Motilal Oswal

Jaiprakash Associates (JPA IN; Mkt Cap USD4.1b, CMP Rs87, Buy)

In 3QFY11 Jaiprakash Associates (JPA) reported revenue of Rs29b (up 1% YoY), EBITDA of Rs7.9b (up 2% YoY) and net profit of Rs2.3b (down 26% YoY).

In 3QFY11, revenue at the cement division was Rs12.4b, up 31% YoY after volume growth of 34% YoY but realizations fell 2.5% YoY.

E&C revenues of Rs12.7b were down 23% YoY and 20% QoQ, which is surprising given that 2QFY11 was impacted by heavy monsoons.

The management stated that the Yamuna Expressway construction had been impacted by agitating locals. Margins in the E&C division were 21.4%.

We have downgraded our earnings estimate for JPA over FY11-13 due to: (1) lower traction in EPC revenue, (2) lower cement sales and realization offset marginally by higher real estate sales and margins. We expect JPA to post net profit of Rs7.2b in FY11 (down 20%, a downgrade of 15%), Rs12.3b in FY12E (up 72% YoY, a downgrade of 11%) and Rs16b in FY13 (up 30%, a downgrade of 15%). Maintain Buy with SOTP based target price of Rs142.

Source : Equity Bulls

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