Accumulate JP Associates; target of Rs 100: Angel Broking

Angel Broking is bullish on Jaiprakash Associates and has recommended accumulate rating on the stock with a target of Rs 100 in its November 15, 2012 research report.

“For 2QFY2013, Jaiprakash Associates (JAL) reported a mixed set of numbers with subdued revenue performance but higher-than-expected numbers at EBITDAM and PAT level. A decline in the construction (17%) segment resulted in a muted performance on the revenue front. However, strong real estate margin resulted in higher EBITDA.”

“On the top-line front, company registered a muted revenue growth of 3.5% yoy to Rs3,005cr which was lower than our estimate of Rs3,231cr. This muted performance was on account of lower than-expected revenues in the construction segment (decline by 17% yoy). However, the cement segment reported a healthy yoy growth of 22.9%. Blended EBITDA margin declined by 15bp/5bp on a yoy/qoq basis to 27.1% and was ahead of our expectation of 25.2%. Real estate margin at 35.5% led to a good show on the margin front. Interest cost came in at Rs464cr, an increase of 23.3% on a yoy basis and was flat on a sequential basis. Depreciation cost came at Rs178cr a jump of 23.4% on a yoy basis. Bottom-line came at Rs128cr a dip of 48.6% on a yoy basis but higher than our estimate due to better-than-expected performance at the operating level.”

“JAL had demerged its cement operations in Andhra Pradesh (5 mtpa) and Gujarat (4.8 mtpa) into a separate entity with a plan to divest stake. This stake sale is part of company’s strategy to reduce its huge debt which continues to remain an overhang on the stock. Hence closure of such a deal would be positive for the company. We recommend Accumulate rating on the stock with a SOTP target price of Rs100,” says Angel Broking research report.  

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