Target 105

Q22009 results - Results ahead of expectation

JPA’s Q22009 net profit at Rs 2.03 bn is sharply above our expectation of Rs1.21
bn, primarily because of higher revenue booking and margins in the construction
division and higher dividend from its subsidiary Jaiprakash Power Ventures Ltd.
The topline grew by 37% yoy, driven by 14% growth in revenues of cement
division and 52% growth in revenues of construction division. Operating profit at
Rs3.47 bn grew at a healthy pace of 57%, driven by a sharp 136% growth in EBIT
of the construction division and Rs100 mn EBIT of real estate division. Dividends
from its Subsidiary Jaiprakash Power Ventures Ltd significantly boosted the net
profit; even adjusting this dividend the profits grew 33% for the quarter. We
maintain our earnings estimates of Rs6.4 for FY2009 and Rs8.7 for FY2010.
However in line with severe deterioration in market multiples of cement,
construction, power and realty stocks, we cut our target multiples for JPA and
arrive at revised target of Rs105 per share of JPA (as compared to Rs240 earlier).
JPA stock is currently trading at 12.4X its FY2009 earnings and 9X its FY2010
earnings and we believe the stock provides compelling value proposition at these
levels. Maintain our BUY recommendation on the stock with a price target of
Rs105.

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