Accumulate JP Associates; target of Rs 88: PLilladher

Prabhudas Lilladher is bullish on Jaiprakash Associates and has recommended accumulate rating on the stock with a target of Rs 88 in its February 12, 2013 research report.
 
“Jaiprakash Associates, Cement and EPC business revenues were up modestly by 7percent and 2.7percent YoY. Real Estate revenues (0.28m sq.ft . Q3FY13) soared by Rs3bn and Rs3.5bn on a QoQ and YoY basis, respectively. Overall, net revenues for JPA stood at Rs29.6bn, registering a growth of 2.1percent. Despatches grew by 8.8percent YoY to 3.7mt and 15percent QoQ. Realisations at Rs3,986/tonne were flat YoY down 7percent QoQ.”
 
“Increasing cost on account of coal and diesel, along with logistic issues, have affected margins by 690bps YoY and 170bps QoQ (please note the numbers are based on our estimated cement volumes). Construction, even though has completed execution of Karcham HEP and YEW, reported a drop of 710bps YoY in margins. EBITDA (Rs7.6bn) was mainly wiped out by an interest cost of Rs5.3bn which increased by 21percent YoY. OOI of Rs1.1bn was higher than the average run rate, leading to PAT of Rs1.1bn, degrowth of 64.2percent YoY. Current debt stands at Rs230bn. Post FCCB and QIP, JPA is targeting to pare down the debt by Rs10bn in the coming quarters. The company is also confident of passing through the higher coal costs from the next quarter. AP and Gujarat EPC projects have started contributing and for Q3FY13 it added Rs660m. JPA is also witnessing higher sales in Jaypee Greens on account of higher demand from the affordable housing segment in Noida.”
 
“We have reduced our FY13 PAT estimates on the back of higher interest cost and low margins. Overhang remains in terms of penalties by various government authorities and higher debt which has led to a sharp correction in the stock price over the last one month and relatively cheap valuation of 4.3x FY14E. We maintain ‘Accumulate’ on the stock,” says Prabhudas Lilladher research report.

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