Jaiprakash Associates –Buy- Emkay Research

Jaiprakash Associates Q4FY10 numbers are inline with our estimate at EBIDTA level, but lower than estimates at net profit level, on account of higher interest and depreciation cost and lower other income.

Revenues grew by 69% y-o-y, driven by 70% growth in cement revenues and 85% growth in construction revenues. With the 59% growth in constriction EBIT, EBIDTA for the quarter grew by 41% y-o-y to Rs900 crore with EBIDTA margins expanding by a smart 500 bps y-o-y to 25.5%. The EBIDTA growth could have been higher but for the 75% EBIT decline in real estate segment.

Interest cost (+78%), depreciation charges (+30%) and other income declined of

23% dragged by 14% yoy, significantly lower than our and consensus expectation. In order to factor in the lower than expected earnings performance during the quarter we have downgraded our FY11% for Jaiprakash Associates by 9.8% to an EPS of Rs5.3. We also introduce our FY121E estimate at Rs6.6. Overall we expect JPA’s standalone revenues to grow at a CAGR of 20% and it earnings to grow at a CAGR of 25% over FY10-12E.

We do not expect JPA to face any funding issue as with sale of treasury stock worth Rs1,695 crore in FY10, Rs600 crore inflow from sale of share in Jaypee Infratech and with the balance treasury stock of 193 mn shares JPA today is in a comfortable funding scenario. Maintain BUY revised price target of

Rs175 (earlier Rs185).

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