ICICIdirect JaiprakashAssociates Q4FY10

Result Update
June 1, 2010
Rating matrix
Rating : Strong Buy Jaiprakash Associates (JAIASS)
Target : Rs 160
Target Period : 12-15 months Rs 124
Potential Upside : 29%
WHAT’S CHANGED…
Key Financials (Rs cr)
PRICE TARGET .............................................................. Changed from Rs 180 to Rs160
FY09 FY10 FY11E FY12E
Net sales 5764.2 10088.9 12933.0 14383.2 EPS (FY11E) ................................................................... Changed from Rs 5.4 to Rs 5.5
EBITDA 1676.0 2624.9 3030.7 3238.9 EPS (FY12E) ................................................................... Changed from Rs 6.8 to Rs 5.7
Adj. Net profit 892.5 893.9 1165.3 1211.7
RATING.......................................................................................from Buy to Strong Buy
Valuation summary
FY09 FY10 FY11E FY12E
Quarterly numbers below expectation…
EPS (Rs) 4.2 4.2 5.5 5.7 Jaiprakash Associates’ (JAL) results were sharply below our
PE(x) 29.7 29.67 22.76 21.9 expectation due to lower other income of Rs 11.9 crore in Q4FY10 (vs.
Target PE(x) 76.1 76.0 58.3 56.0 Rs 42.9 crore in Q4FY09), higher interest expenses and taxes. However,
EV/EBITDA(x) 21.9 15.0 12.9 12.3 the operating performance came largely in line with our expectation.
P/BV(x) 4.0 3.5 3.1 2.7 We have now incorporated these changes into our estimates and have
RoNW(%) 15.9 12.5 14.4 13.1 revised our earning estimates. In terms of valuation, we are now valuing
RoCE(%) 8.4 10.0 10.3 10.1
the JAL cement business at close to its replacement cost (US$102 per
tonne). Also, we have valued JAL’s stake in Yamuna Expressway at a
20% discount to the CMP in our SOTP valuation. Hence, we are revising
our price target to Rs 160 per share and upgrading it to STRONG BUY.
Stock data
Mcap 26522.5 crore Q4FY10 results below our expectation
Debt 799.6 crore
Cash & Invst 67.4 crore
JAL’s revenues grew 58.8% YoY to Rs 3345.2 crore, above our
EV 27254.7 crore expectation, driven by the construction division (up 80.2% YoY to
52 week H/L 180/110 Rs 1974.1 crore) and cement division (grew 70.2% YoY to Rs 724.8
Equity cap 53.0 crore crore). However, the adjusted net income declined by 39% YoY to
Face Value Rs 10 Rs 244 crore, below our expectation due to lower other income on
MF Holding (%) 9.9 account of adjustment of VAT in the cement division and higher
FII Holding (%) 26.0 interest expenses and tax rate.
Price movement (Stock vs. Nifty)
Consolidated numbers remained muted in FY10
200 6000
JAL’s consolidated revenues grew 36% YoY to Rs 6526.6 crore in
5000
150 FY10 and remained below standalone revenues of Rs 10,088 crore
4000
on higher inter segment revenues. In terms of adjusted net profit, it
100 3000 declined 27.4% YoY to Rs 372.7 crore due to a sharp rise in interest
50
2000 expenses to Rs 1286 crore in FY10 from Rs 706.2 crore in FY09.
1000
Monetises Rs 590 crore on Jaypee Infratech IPO
0 0
With the completion of the Jaypee Infratech IPO, JAL has
Jun-09
Jul-09
Oct-09
Nov-09
Aug-09
Sep-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
successfully monetised Rs 591 crore through an offer for sale of six

JAL(LHS) Nifty
crore equity shares. However, we have now revised our valuation
Analyst’s name for JAL’s stake in Yamuna Expressway at a 20% discount to CMP.
Deepak Purswani Valuation
deepak.purswani@icicisecurities.com
Bhupendra Tiwary
At the CMP, the stock is trading at 21.7x FY12 earning estimates and 2.7x
bhupendra.tiwary@icicisecurities.com P/BV. We are upgrading the stock to STRONG BUY and revising our
SOTP based price target to Rs 160.
Exhibit 1 Financial performance

Particulars Q4 FY10 Q4FY10E Q4FY09 Q3FY10 YoY Gr (%) QoQ Gr (%)
Net sales 3345.2 3077.7 2106.5 2852.4 58.8 17.3
EBITDA 853.7 774.3 764.7 773.8 11.6 10.3
EBITDA Margin (%) 25.2 25.2 36.3 27.1
Depreciation 133.4 112.4 104.3 110.9 27.9 20.2
Interest 298.9 255.9 168.7 276.2 77.2 8.2
PAT 244.0 363.9 399.7 314.0 -39.0 -22.3
Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research

Jaiprakash Associates (JAIASS)
Q4FY10 results below our expectation

• JAL’s revenues grew 58.8% YoY to Rs 3345.2 crore, above our
expectation. The growth in topline was driven by the construction
division (up 80.2% YoY to Rs 1974.1 crore) and the cement division
(grew 70.2% YoY to Rs 724.8 crore)
The growth in topline was driven by the construction
division and the cement division. The adjusted net profit
• The OPM declined by over 10 percentage points to 25.6% due to a
came below our expectation due to lower other income
decline in EBIT in the cement division (down 550 bps to 24.3%) and
and adjustment of VAT in Q4FY10
construction division (down 13.1% to 19.8%) during the quarter
• However, the adjusted net profit declined 39% YoY to Rs 244 crore,
below our expectation. The results came below our expectation due
to lower other income of Rs 11.9 crore in Q4FY10 vs. Rs 42.9 crore in
Q4FY09 due to an adjustment of VAT in the cement division, higher
expenses and tax rate
Exhibit 2: Q4FY10 performance
Q4FY09 Q4 FY10 Y-o-Y%

Net sales 2106 3345 58.8
Other operating income 22 1 -94.1
Total Revenues 2128 3347 57.2
Raw material cost 1105 1947 76.2
Staff cost 38 140 271.5
Other expenditure 199 404 103.3
Total expenditure 1342 2492 85.7
Operating profit 765 855 11.8
Depreciation 104 133 27.9
Interest 169 299 77.2
Other income 43 12 -72.3
PBT 557 435 -21.9
Taxes 157 189 20.5
Adjusted Net profit 400 246 -38.6
Exceptional items 0 -2
RPAT 400 244 -39.0
Margin (%)
OPM 36.3 25.6
NPM 19.0 7.3
Monetises Rs 590 crore on Jaypee Infratech IPO

Recently, JAL completed the IPO of Jaypee Infratech. Along with the IPO,
the company also made an offer for sale of six crore equity shares and
The company made an offer for sale of six crore equity monetised Rs 591 crore. The proceeds from the same are expected to be
shares and monetised Rs 591 crore, along with the IPO of booked in Q1FY11. However, we have now revised our valuation for
Jaypee Infratech. The proceeds from the same are JAL’s stake value in Yamuna Expressway at a 20% discount to the CMP.
expected to be booked in Q1FY11

Page 2
Segmental Performance
Cement division revenues grow 70.2% YoY

Cement division revenues grew 70.2% YoY to Rs 1233.4 crore in Q4FY10.
On a sequential basis, cement division revenues grew 30.1% driven by
Cement division revenues grew 70.2% YoY to Rs 1233.4 volume (grew 25.5% to 3.6 MTPA) and realisation (grew 4.1%
crore in Q4FY10 sequentially to Rs 3379 per tonne). In FY10, the company’s cement
division capacity has increased from 14.7 MTPA to 21.3 MTPA (including
2.2 MTPA in JV). Going forward, the company plans to scale it up to 33
MTPA in FY12.
Construction division – strong show again
Construction division revenues grew 80.2% to Rs 1974.1 crore on the
back of execution of Yamuna Expressway and Karcham Wangtoo project.
Construction division revenues grew 80.2% to Rs 1974.1 EBIT margin in the division stood at 19.8% in this quarter, largely in line
crore on the back of execution of the Yamuna Expressway with our expectation. In terms of order book, the company currently has
and Karcham Wangtoo project an order book of Rs 10,000 crore (excluding Ganga Expressway).
Real estate – muted performance in the quarter
On a standalone basis, the real estate division’s performance was muted
in this quarter. Overall, the company has sold 1.4 million sq ft in Jaypee
Green Luxurious project at an average realisation of Rs 5,500 psf. At the
Noida Land parcel, the company has sold 20.35 million sq ft at an average
realisation of Rs 2,000 psf and collected approximately Rs 1660 crore
against this sale.
The performance of the real estate division was muted in Exhibit 3: Revenues details (Rs cr)
this quarter Q4FY09 Q4 FY10 Y-o-Y%
Cement & cement products 724.8 1233.4 70.2
Construction 1095.7 1974.1 80.2
Power 4.6 4.0 -13.0
Hotel/Hospitality 40.2 45.8 14.1
Real Estate 273.7 124.4 -54.5
Investment 42.9 11.9 -72.3
Infrastructure projects 0.0 0.0
Others 15.5 25.6 64.9
Unallocated 28.3 33.0 16.4
Total 2225.7 3452.2 55.1
Less: Intersegment Revenues 54.4 93.8 72.4
Total Revenues 2171.3 3358.4 54.7
Exhibit 4: EBIT details (Rs cr)

Q4FY09 Q4 FY10 Y-o-Y%
Construction 360.9 391.6 8.5
Power -1.4 0.2 -114.2
Hotel/Hospitality 9.5 3.9 -58.7
Real Estate 150.3 38.8 -74.2
Investment 42.9 11.9 -72.3
Others -0.6 7.0
Less: Unallocable Expenses 52.0 21.1 -59.3
EBIT 725.4 731.9 0.9

Page 3
Exhibit 5: EBIT margin (%)

Q4FY09 Q4 FY10
Cement & cement products 29.8 24.3
Construction 32.9 19.8
Power -30.5 5.0
Hotel/Hospitality 23.7 8.6
Real Estate 54.9 31.2
EBIT 33.4 21.8
FY10 consolidated performance remains muted

The growth in the consolidated topline was lower than • JAL’s revenues grew 36% YoY to Rs 6525.6 crore. The growth in
standalone revenue growth due to inter-segment revenues topline was driven by the construction division (up 83.8% YoY to Rs
5,338 crore) and cement division (grew 62.2% YoY to Rs 3966 crore).
However, the growth in the consolidated topline was lower than
standalone revenue growth due to inter segment revenues.
• However, the adjusted net profit declined 27.4% YoY to Rs 372.7

crore due to a sharp rise in interest expenses. Interest expenses
The sharp rise in interest expenses was on account of the increased to Rs 1287 crore in FY10 from Rs 706 crore in FY09. The
sharp rise in the debt. The consolidated debt increased sharp rise in interest expenses was on account of the sharp rise in
from Rs 19320.2 crore to Rs 35271 crore in FY10 debt. The consolidated debt increased to Rs 35,271 crore in FY10
from Rs 19320.2 crore
Exhibit 6: FY10 consolidated performance

FY09 FY10 Y-oY%
Net sales 4799.2 6525.6 36.0
Other operating income 190.1 247.1 30.0
Reported Net sales 4989.3 6772.7 35.7
Consumption of raw material 1905.5 2557.7 34.2
Staff cost 295.5 382.2 29.3
Other expenditure 808.9 1080.4 33.6
Total expenditure 3009.8 4020.2 33.6
Operating profit 1789.4 2505.3 40.0
Depreciation 332.6 472.2 42.0
Interest 706.2 1286.4 82.2
Other income 6.0 16.1 168.3
PBT 946.7 1009.9 6.7
Taxes 433.1 637.3 47.1
Adjusted net profit 513.6 372.7 -27.4
Exceptional items -1.0 1021.1
RPAT 512.6 1393.8 171.9

Page 4
Exhibit 7: Consolidated revenue details (Rs cr)

FY09 FY10 Y-o-Y%
Construction 2903.5 5337.9 83.8
Power 773.6 737.9 -4.6
Real Estate 441.4 653.6 48.1
Investment 6.0 16.1 168.3
Others 15.5 39.0 151.2
Unallocated 120.2 145.6 21.2
Total 7416.3 11691.9 57.7
Less: Intersegment Revenues 2420.9 4903.2 102.5
Total Revenues 4995.3 6788.8 35.9
Exhibit 8: Consolidated EBIT details (Rs cr)

FY09 FY10 Y-o-Y%
Construction 101.7 494.2 386.1
Power 575.1 541.1 -5.9
Real Estate 217.7 259.8 19.3
Investment 6.0 16.1 168.3
Others -0.6 -1.0
Less: Unallocable Expenses 124.2 107.6 -13.3
EBIT 1651.9 2290.4 38.7
Exhibit 9: Consolidated EBIT margin

FY09 FY10
Cement & cement products 27.9 26.6
Construction 3.5 9.3
Power 74.3 73.3
Hotel/Hospitality 18.2 5.8
Real Estate 49.3 39.8
EBIT 33.1 33.7
Valuation
We have revised our earning estimates downwards to reflect the lower-

than-expected other income. Our revised earning estimate now stands at
Rs 4.9 per share for FY11 and Rs 5.8 per share.
At the CMP, the stock is trading at 21.7x FY12 earning estimates and 2.7x
P/BV. We continue to value the stock using SOTP valuation method. In
our SOTP valuation, we are now valuing the JAL cement business at
close to its replacement cost (US$102 per tonne). Furthermore, we are
now valuing JAL’s stake in Yamuna Expressway and treasury shares at a
20% discount to CMP in our valuation. Consequently, we are revising our
price target to Rs 160 per share and upgrading the stock to STRONG
BUY.

Page 5
Exhibit 10: Valuation Summary

Business Value (Rs cr) Per share Comment
Cement Division 12347 58 7.5x FY12E EV/EBITDA implying EV/tonne of US$103 on FY12 capacity of 26.8 MTPA
Construction Division 10162 48 6.4x FY12E EV/EBITDA , in line with mid cap construction players
Power Division 12751 60 Value power portfolio using FCFE and have considered COE of 12% for operational
projects, 13% for projects upto FY15 & 16% for the projects expected beyond FY15
Real Estate Division 9234 44
Yamuna Expressway - 8068 38 At 20% discount to CMP
Jaypee Greens 1166 5 at 1x of its NAV
Hotel Division 218 1 7x FY12 EV/EBITDA

Ganga Expressway 274 1 1x P/BV
Himalayan Expressway 95 0 1x P/BV
Wind Power 490 2 2x P/BV
Captive coal mine 41 0 1x P/BV
Treasury shares 1893 9 18.9 crore valued at 20% discount to CMP
Total Enterprise Value 47505 224
Less: Net debt 13477 64 FY12E Net debt
Target 34028 160
Exhibit 11: Valuation Table

Sales (Rs cr) Sales Gr (%) EPS (Rs) EPS Gr (%) P/E (x) P/BV(x) RoNW(%) RoCE(%)
FY09 5764.2 44.7 4.2 49.4 37.3 5.0 15.9 8.4
FY10 9821.4 70.4 4.8 13.4 32.9 4.4 14.1 9.7
FY11E 12104.3 23.2 5.4 13.7 28.9 3.8 14.0 9.7
FY12E 14258.6 17.8 6.8 24.4 23.3 3.3 15.2 10.3

Page 6
ICICIdirect.com coverage universe (Construction)
JP Associates Sales (Rs Crore) EPS (Rs) PE (x) P/BV(x) RoNW (%) RoCE (%)
Idirect Code JAIASS CMP 124 FY09 5,764.2 4.2 29.7 4.0 15.9 8.4
Mcap (Rs crore) 26523 Target 160 FY10 10,088.9 4.2 29.7 3.5 12.5 10.0
% Upside 29% FY11E 12,103.4 4.9 25.4 3.1 13.0 9.6
FY12E 14,395.4 5.8 21.7 2.7 13.4 10.2
Simplex Infra Sales (Rs Crore) EPS (Rs) PE (x) P/BV(x) RoNW (%) RoCE (%)
Idirect Code SIMCON CMP 488 FY09 4,662.7 23.2 20.5 2.6 13.9 14.7
% Upside 7% FY11E 5,403.5 31.6 15.0 2.1 14.7 14.7
FY12E 6,430.3 40.5 11.7 1.8 16.3 17.2
Unity Infra Sales (Rs Crore) EPS (Rs) PE (x) P/BV(x) RoNW (%) RoCE (%)
Idirect Code UNIINF CMP 104 FY09 1,130.8 10.4 12.3 2.0 18.0 18.8
% Upside 20% FY11E 1,801.0 13.6 9.4 1.4 16.5 18.7
FY12E 2,055.0 15.5 8.3 1.2 16.2 19.2

Page 7
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the
notional target price is defined as the analysts' valuation for a stock.
Strong Buy: 20% or more;

Buy: Between 10% and 20%;
Add: Up to 10%;
Reduce: Up to -10%
Sell: -10% or more;
Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,

ICICI Securities Limited,
7th Floor, Akruti Centre Point,
MIDC Main Road, Marol Naka,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
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Result Update

successfully monetised Rs 591 crore through an offer for sale of six

Exhibit 1 Financial performance

ICICIdirect.com | Equity Research

Q4FY10 results below our expectation

Exhibit 2: Q4FY10 performance

Q4FY09 Q4 FY10 Y-o-Y%

Monetises Rs 590 crore on Jaypee Infratech IPO

ICICIdirect.com | Equity Research

Cement division revenues grow 70.2% YoY

Exhibit 4: EBIT details (Rs cr)

ICICIdirect.com | Equity Research

Exhibit 5: EBIT margin (%)

FY10 consolidated performance remains muted

• However, the adjusted net profit declined 27.4% YoY to Rs 372.7

Exhibit 6: FY10 consolidated performance

ICICIdirect.com | Equity Research

Exhibit 7: Consolidated revenue details (Rs cr)

Exhibit 8: Consolidated EBIT details (Rs cr)

Exhibit 9: Consolidated EBIT margin

We have revised our earning estimates downwards to reflect the lower-

ICICIdirect.com | Equity Research

Exhibit 10: Valuation Summary

Hotel Division 218 1 7x FY12 EV/EBITDA

Exhibit 11: Valuation Table

ICICIdirect.com | Equity Research

ICICIdirect.com coverage universe (Construction)

ICICIdirect.com | Equity Research

Strong Buy: 20% or more;

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICIdirect.com | Equity Research

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