Feb 13, 2013 05:34 PM IST | Source:

Hold Jaiprakash Associates: Ventura

Ventura has recommended hold rating on Jaiprakash Associates, in its February 12, 2013 research report.

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Ventura has recommended hold rating on Jaiprakash Associates, in its February 12, 2013 research report.
“Jaiprakash Associates Ltd reported 15.5percent YoY increase in revenues to Rs 3430.9 crore as against Rs 2969.5 crore in Q3FY12. EBITDA for the quarter stood at Rs 795 crore, down by 8.3percent YoY, on account of margin decline of the cement business. EBITDA margins contracted by 600 bps on YoY basis. The net profit stood at Rs 110.9 crore, down 64.7percent yoy led by lower other income, higher interest and depreciation costs and higher tax rate (33.6percent in Q3FY13 v/s 21.6percent in Q3FY12). Cement division’s revenues registered a growth of 7percent yoy to Rs.1474.7 crore. The EBIT margins for the cement division stood at 8percent, down 200 bps qoq.”
“The company sold 3.7 MT of cement in Q3FY13. Cement realization was Rs 3943/ tonne while EBITDA per tonne was Rs 652 for the quarter. Construction division’s revenues grew 3percent yoy to Rs. 1275.7 crore. The EBIT margins contracted by 700 bps on YoY basis and came in at 23percent as against 30percent in Q3FY12. Real estate division’s revenues increased by 99percent yoy to Rs. 612.4 crore. The EBIT margins declined 1200 bps to 36percent on YoY basis. Higher depreciation and Interest costs coupled with lower other income led to 64.7percent fall in the net profit at Rs 128 crore. The depreciation for the quarter stood at Rs 181.3 crore, higher by 9.9percent yoy basis. While the interest costs, stood at Rs 532.7 crore, higher by 20.7percent YoY. The PAT margins stood at 3.2percent.”

“Jaiprakash Associates reported numbers which missed the street estimates. Decline in EBIT margin in cement business, higher depreciation and interest costs coupled with higher tax rate dragged the profitability. Robust assets and strong execution capability defines JP Associates, However, servicing of the huge debt remains a major concern on the stock. Jaiprakash Associates has raised USD 100 mn (~Rs 530 crore) through QIP route at Rs 83 per share in February 2013. The issue of shares has meant a 3percent dilution on equity. Any stake sale of the cement business in the coming months will enable the company to reduce debt leading to a re-rating of the stock. At the CMP of Rs 72, the stock is currently trading at 12.6x and 7.2x its FY14 and FY15 consensus earnings estimates, we recommend a HOLD on the stock,” says Ventura research report.

Public holding more than 90% in Indian cos

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