Hold Jaiprakash Associates: Ventura

Ventura has recommended hold rating on Jaiprakash Associates, in its June 1, 2012 research report.

"Jaiprakash Associates Ltd reported 3.1% yoy increase in revenues to Rs 4,026.4 crore as against Rs 3903.9 crore reported in the previous corresponding quarter. However, EBITDA for the quarter stood at Rs 1019.4 crore, up by 21% yoy, driven by strong construction margins. The net profit stood at Rs 283.8 crore, down 6.5% yoy led by lower other income, higher interest and depreciation costs."

"Cement division’s revenues registered a 8% yoy and 22% qoq growth to Rs.1,686.7 crore on the back of higher dispatches of 5.8 mt (+38.6% yoy, 20.3% qoq). Volume growth was on the back of the recently commissioned cement plants. The EBIT margins for the cement division stood at 13%, down 200 bps on the back of higher depreciation and high raw material expenses."

"Robust assets and strong execution capability defines JP Associates, However, servicing of the huge debt remains a major concern on the stock. In addition, the forthcoming FCCBs repayment adds to the woes. The ability to repair balance sheet is the key to sustain the stock price. However, we are hopeful that the management through either stake sale or divestment of non-core assets would able to reduce its debt. Further, current proposition for prepayment of FCCBs, augur well for the company. At the CMP of Rs 62, the stock is currently trading at 10.2x and 8.4x its FY13 and FY14 consensus earnings estimates, we recommend a HOLD on the stock," says Ventura Securities research report.

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