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1. November 4, 2010
JAIPRAKASH ASSOCIATES LTD BUY
Jaiprakash Associates Ltd (JAL)’s reported 62.3%Y-o-Y revenue growth to Rs29.9bn in
Q2FY2011 largely supported by the cement and construction divisions. However, the
bottom line reported an 87% fall to Rs 1.15bn on account of presence of Rs 9.4bn as
extra-ordinary income relating to treasury sale in the corresponding quarter last year.
The key takeaways from the result are
The revenues from the cement and cement products grew by 43% Y-o-Y to Rs 12.08bn
and 73% Y-o-Y for the construction segment to Rs 15.71bn. The Real estate segment
grew by 266% to Rs 3.2bn.
Cement revenue growth was driven by 59% volume growth which stood at 3.4mt, as
JAL commissioned new capacities and ramped up utilization.
The decline in cement PBIT margins by nearly 1000 basis points to 16% was partly
offset by the higher PBIT margins at the construction and real estate divisions, which
grew by 110 & 817basis points to 20.9% & 41% respectively for the quarter.
However, due to a higher provision of deferred tax, which increased nearly 3 times to
Rs 1.17bn, in addition to higher depreciation and interest expenses impacted the
bottom line.
Based on a standalone P/E multiple of 20, the fair value for Jaiprakash Associates Ltd
works out to Rs 153.
Strong revenue growth of 62% led by 73% growth
in construction & 43% growth in cement
revenues.
Recommendations <= 1 year 1 - 2 yrs 2 - 5 yrs
Strong Buy
Buy
Hold
Reduce
Sell
StrongBuy– ExpectedReturns> 20%p.a.
Buy– ExpectedReturnsfrom 10to20%p.a.
Hold– ExpectedReturnsfrom 0%to10%p.a.
Reduce–ExpectedReturnsfrom 0%to10%p.a.with possibledownsiderisk
Sell – Returns< 0%
BSE/ NSECode
CMPRs(3rd Nov’10)
Market Cap ( Rsmn)
52 Week High-low
30D 3M 6M 1Y
Jaiprakash Associates 0% 4% -14% -4%
Sensex 0% 13% 18% 33%
Nifty 0% 13% 18% 35%
STOCKDATA
532532 / JPASSOCIAT
124
264,105
167.8 - 107.7
STOCKRETURN (%)
Financial Snapshot
Projections(Rs. Mn) Q2FY10 Q2FY11 % chg FY09A FY10A % chg FY11E FY12E
Net Revenue 18,438 29,933 62% 59,795 103,160 73% 150,273 179,549
Total Income 28,543 30,780 8% 61523 116718 90% 157787 186731
EBIDTA 14,856 7,658 -48% 20,645 38,936 89% 41,385 51,003
EBIDTA % 80.6% 25.6% 34.5% 37.7% 27.5% 28.4%
PAT 8,702 1,155 -87% 8,970 17,084 90% 13,187 16,879
NPM % 47% 4% 15.0% 16.6% 8.8% 9.4%
EPSRs 4.1 0.5 -87% 4.3 8.0 88% 6.2 7.9
BVPSRs 31.9 40.0 26% 46.2 54.1
ROE% 13.3% 13.4% 20.1% 13.4%
PERx 20.0 15.6
P/BRatio 2.7 2.3

2. November 4, 2010
OTHER HIGHLIGHTS
During H1FY2011, the company commissioned cement capacity at Gujarat (1.2MTPA), Himachal Pradesh (2MTPA)
and Uttarakhand (1.2MTPA). Currently, the capacity of the company is about 24MTPA which is expected to
increase to 30MTPA by the end of FY2011 and to 35MTPA by the end of FY2012.
The growth in the construction division was supported by the strong execution of the Yamuna Expressway project
and the Karcham Wangtoo project during the quarter. The delay in the execution of the Srisailam tunneling project
and the Baglihar hydropower project in Q1FY11 is expected to be resolved by the end of next quarter.
We expect JAL Ltd’s revenues to grow at a CAGR of 32% over FY2010-12 to Rs 179bn by FY2012. We further
estimate that PAT would jump 27% in FY12 to Rs 16.8bn from an estimated Rs 13.2bn in FY2011.
Based on a P/E multiple of 20 times its FY12 EPS, the fair value per share for the company works out to Rs 153.
We recommend a ‘BUY’ rating on the stock.
The company sold over
1 million square feet of
real estate in Noida and
Greater Noida during
the quarter
Financial Analysisand Projections
Particulars(RsMn) FY08A FY09A FY10A FY11E FY12E
Net Revenue 41,489 59,795 103,160 150,273 179,549
Other Income 1,247 1,728 13,557 7,514 7,182
Total Income 42,736 61,523 116,718 157,787 186,731
Operating Expenditure 28,879 40,878 77,782 116,401 135,728
Depreciation 2,033 3,092 4,561 7,283 9,468
EBIT 11,825 17,553 34,375 34,102 41,535
EBITMargin (%) 28.5% 29.4% 33.3% 22.7% 23.1%
Interest 3,391 5,043 10,558 12,834 15,961
Profit Before Tax 8,433 12,510 23,817 21,269 25,574
Less:Tax 2,337 3,540 6,733 8,082 8,695
Profit After Tax 6,097 8,970 17,084 13,187 16,879
PATMargin (%) 14.7% 15.0% 16.6% 8.8% 9.4%
ROE(%) 13.3% 13.3% 13.4% 20.1% 13.4%
EPS(Rs) 3.5 4.3 8.0 6.2 7.9
BVPS(Rs) 26.2 31.9 40.0 46.2 54.1
Valuation Ratios(x) FY11E FY12E
P/E 20.0 15.6
P/B 2.7 2.3