Nov 17, 2012 02:17 PM IST | Source:

Hold Jaiprakash Associates: Ventura

Ventura has recommended hold rating on Jaiprakash Associates, in its November 16, 2012 research report.

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Ventura has recommended hold rating on Jaiprakash Associates, in its November 16, 2012 research report.

“Jaiprakash Associates Ltd reported 3.5% yoy increase in revenues to Rs 3005 crore as against Rs 2902 crore in Q2FY12. EBITDA for the quarter stood at Rs 813.6 crore, up by 3% yoy, driven by strong construction margins. The net profit stood at Rs 128 crore, down 48.5% yoy led by lower other income, higher interest and depreciation costs and higher tax rate (35.6% in Q2FY13 v/s 28.6% in Q2FY12). Cement division’s revenues registered a growth of 4% yoy to Rs.1371.9 crore. The EBIT margins for the cement division stood at 10%, down 500 bps qoq. The cement production for the quarter stood at 3.21 MT. Cement realization was Rs 4287/ tonne while EBITDA per tonne was Rs 785 for the quarter.”

“Construction division’s revenues declined by 22% yoy to Rs. 439.3 crore, although the EBIT margins were at 34% as against 36% in Q2FY12. However, the margins increased on a qoq basis by 400 bps. Real estate division’s revenues increase by 33% yoy to Rs. 267.8 crore. The EBIT margins declined by 772 basis points to 44%. Higher depreciation and Interest costs coupled with lower other income led to 48.5% fall in the net profit at Rs 128 crore. The depreciation for the quarter stood at Rs 177.8 crore, higher by 23.4% yoy basis. While the interest costs, stood at Rs 464.4 crore, higher by 23.3% yoy . The PAT margins stood at 4.3%.”

“Jaiprakash Associates reported numbers in line with street estimates. 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. Any stake sale in the cement business in the coming months will enable the company to reduce the debt and hence the re-rating of the stock. We believe that construction margins at 34% are unsustainable and should decline in the coming quarters. At the CMP of Rs 91, the stock is currently trading at 18.3x and 14.3x its FY13 and FY14 consensus earnings estimates, we recommend a HOLD on the stock,” says Ventura research report.    

Non-Institutions holding more than 90% in Indian cos

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