Why JP Associates Q1 earnings will be under pressure YoY

JP Associates may report over 36 percent year-on-year decline in profit during June quarter to Rs 88.7 crore as margins remained subdued on weak pricing scenario. Sales, however  may climb over 10 percent to Rs 3264 crore, states CNBC-TV18 poll.

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EBITDA is also estimated to slide around 230 bps to 23.8 percent

Factors to have impacted June quarter numbers

Cement dispatches are expected to be at 3.8 million tonne, down 5 percent Y-o-Y

Expect realisations to be flat sequentially.

EPC ( engineering,procurement, construction) segment which makes up 40 of overall revenues is expected to report marginal decline in revenues by 5 percent Y-o-Y.
 
Margins in EPC business also expected to slip by 400 – 450 bps on a YoY basis

Interest cost to edge higher by around 10 percent Y-o-Y

This quarter, focus will be on any MTM (mark-to-market) hit – on company’s un-hedged foreign exposure – which could stand at almost Rs 5,000 crore.

Stock strategy
JP shares declined 3 percent to close the day at Rs 41.75 on Friday. The stock has been under a lot of pressure – trading at new 52 week lows of Rs 40.4  which it made on 26 July 2013
Stock price has come off significantly from the highs of Rs 106.8 seen in Dec 2012--- seeing a collapse of 42 percent in the last 1 year and around 45 percent in the last 3 months

Analysts are concerned about price correction in medium term as the company is not seeing any meaningful growth in order book in EPC business and despite management clarification, media reports have been indicating that the cement stake sale – which is imperative to pare down debt has been postponed for now.