Buy JP Associates; target of Rs 76: Angel Broking

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Buy JP Associates; target of Rs 76: Angel Broking

Angel Broking is bullish on Jaiprakash Associates and has recommended buy rating on the stock with a target of Rs 76 in its August 17, 2011 research report.

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Angel Broking is bullish on Jaiprakash Associates and has recommended buy rating on the stock with a target of Rs 76 in its August 17, 2011 research report.

"Jaiprakash Associates (JAL) reported disappointing set of numbers for 1QFY2012. The company's top line came below our expectations. Consequently, its earnings disappointed due to subdued top-line growth, high interest cost and tax rate. However, the company's margin was in-line with our estimates. On account of poor performance in 1QFY2012, the current scenario of high interest rates (with no letting up in sight) and persistent pessimism surrounding the sector, we have revised our estimates downwards for FY2012 and FY2013. However, the recent sharp decline in JAL's stock price has brought the stock at attractive valuations of 1.1x P/BV on FY2013E (standalone)."

"On the top-line front, the company's revenue declined by 1.1% yoy to Rs3,178cr (Rs3,214cr) vs. our estimate of Rs3,588cr. Poor performance on the top-line front was due to the decline in construction and real estate revenue by 11.3% and 5.2%, respectively, on a yoy basis. EBITDA margin came in at 24.3% (21.2%), registering an improvement of 310bp yoy and in-line with our expectation of 24.0%. Interest cost stood at Rs426.4cr, in-line with our expectation. Depreciation cost came in at Rs172.1cr, a jump of 14.5% yoy and 14.2% qoq and above our estimate of Rs158.2cr. The bottom line came in at Rs107.0cr (Rs105.8cr) vs. our estimate of Rs199.3cr due to lower revenue, higher depreciation and higher tax rate (40.4%)."

"We have valued JAL's cement and construction business at 6x EV/EBITDA - (Rs62.2/share) and (Rs30.9/share), respectively. We have valued its power and real estate businesses on mcap basis (giving 15% holding company discount), which contributes Rs47.1/share to our target price. The hotel segment contributes Rs0.8/share. Treasury shares (Rs5.2/share) have been valued at the current market price, whereas net debt is accounted for on a per share basis in our valuation at Rs69.9. We maintain our Buy view on the stock with an SOTP target price of Rs76, implying an upside of 31.8% from current levels," says Angel Broking research report.

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To read the full report click on the attachment