Emkay Global Financial Services has recommended hold rating on Jaiprakash Associates with a target price of Rs 63, in its research report dated August 13, 2014.
Emkay's report on Jaiprakash Associates
Standalone EBITDA at Rs7.55 bn (flat YoY) was higher than estimate of Rs7 bn led by higher than expected margins in cement and construction segments. Cement EBIT/t at Rs 481 (+Rs 200/t qoq) vs estimate of Rs 342
Revenues at Rs 30 bn (-9% yoy, -12% qoq) was lower than expectation of Rs 32 bn led by lower than expected revenues in construction & real estate segment. Net loss at Rs 806 mn was largely in line with estimate of Rs 850 mn
JPA completed asset monetization of 4.8 mtpa Gujarat plant in June. Bokaro JV (74% stake) and Hydro power plants (JPVL) were also divested recently
Standalone debt at Rs270 bn in FY14, Interest coverage for FY14 at 1.0x (0.75x in Q1FY15). Further asset monetization critical for de-leveraging
JPA reported net loss of Rs 806 mn against our expected loss of Rs 851 mn. JPA’s standalone gross debt stood at Rs270 bn in FY14. This coupled with higher interest/refinance rate; led to 34% yoy jump in interest cost which stood at Rs7.9 bn. With the asset monetization of 4.8 mtpa Gujarat plant and Bokaro JV (74% stake), JPA needs a continued asset sale plan to further de-leverage its balance sheet. We expect the debt level to reduce in FY15E with interest coverage ratio to improve to 1.4x by FY16 (1x in FY14 and 0.75x in Q1FY15). In the backdrop of no near term catalyst for earning improvement, we retain our earnings estimate and HOLD rating on the stock with revised target price of Rs 63", says Emkay Global Financial Services research.
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