Motilal Oswal is bullish on Jaiprakash Associates
and has recommended buy rating on the stock with a target of Rs 115 in its February 12, 2013 research report.
“Jaiprakash Associates reported 3QFY13 standalone PAT of INR1.1b, lower than our estimate of INR1.3b. Key deviation has been higher interest cost at INR5.3b v/s estimate of INR4.8b. Higher interest cost is due to ECB/FCCB fund raising, higher finance charges and higher interest cost on capitalization of cement capacity. Other income for the quarter was higher due to EPC work carried out for an associate company (Heavy Engineering Work) as also due to income received on waste management project. Performance across division remained divergent. Higher revenues for real estate division was a key positive (INR6.1b v/s est of INR4.8b), while cost absorption restricted the decline in EBIT/ton (by INR95/ton) for cement division despite a steep fall in realization (by INR250/ton). EPC division revenues remained muted, while margins continued to remain healthy at 22percent (v/s est of 19percent). Consolidated net debt as at Mar-12 stood at INR440b, entailing DER of 3.8x. Divestment of stake in Jaypee Cement would enable JPA to raise funds and de-leverage the balance sheet.”
“We cut FY13E earnings by ~17percent to factor the higher interest cost and realigning assumption across the division. We expect JPA to report net profit of INR6.1b in FY13E (down 40percent YoY) and INR9.8b in FY14E (up 60percent YoY). The stock trades at FY14E PER of 15.8x and P/B of 1.3x on FY14E. Buy,” says Motilal Oswal research report.
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