In the near-term, he said, there is a immense value to be unlocked in JP Associates. “It has got a 7 million tonne cement division. They are the sixth largest, trying to become third largest by expanding production. They plan to reach 30 million by 2011 but they will reach 80 million by just 2009. “ The company has a number of hydropower projects under construction, he said. It also has a presence in real estate, which is its main core business, he added.
Q: What is your own sense on JP Associates with all that you have heard in terms of the Taj Expressway with what the management has been saying and of course the valuations at this point of time, would you buy it or are there still some concerns on this stock?
A: One line answer will be I will buy but market has gone down from 21,000 to even as low as 15,500 and I think any small confusion or a misinterpretation has been taken as a battling ground for the market players.
If you look at JP, there is another way of looking at the valuations. I think people are now looking at near-term valuations and they are not considering the long-term valuations. So JP has got a cement division, which is 7 million tonne. They are the sixth largest, trying to become third largest by getting into expansion and they will reach 30 million by 2011, they will reach 80 million by just 2009. So I think there is a clear-cut track record this company has got. We assigned a value of Rs 130 for their cement business.
If you look at the hydropower projects, EPC contracts have 50% share and if you look at their own power projects, they have 700 megawatt of power, 300 from Baspa-II and 400 from Vishnuprayag. We are valuing the 700-megawatt at Rs 44, now there is also 1000-megawatt power for which they have already done the financial closure on September 2006. This project is going to get completed by 2011.
Looking at the far end kind of a valuation, I am just stripping it off, I am not taking any value for this 1000-megawatt. They have a very good EPC contract and order book of Rs 117 billion and they have 50% market share in hydro. I assigned a value of Rs 41 for the EPC business.
Coming back to the main core, the real estate where JP Green is a very clear cut 50% of their-stocks have been already sold where we have assigned a value of 14 and I would say there is a confusion in the mind of the investor about Taj Expressway and we just take Taj Expressway at nil value. Even if I take Taj Expressway at nil value and any power project, which is not operational the value comes Rs 229, which is just Rs 30 below the current market price.
Even if you take the worst scenario by saying that 55% is the share of JP in JP Infratech then at least on Rs 162 of real estate value that I am assigning Rs 89 comes as a part of 55% share.
So even if you add in the worst scenario, which is 55%, the total value comes to Rs 318. I think one of your analysts is saying that there is 99% share in JP Infra, I think it anyway removes all kind of confusions.
So even if you look at from the near-term there is a immense value. Even if you take 55% share of JP even then the value comes to Rs 318. I am not taking 2,100 megawatt of power which they have already got for which they are working in the next six months. I am not taking anything, which is even close for financial closer. I think the strip down value itself is Rs 229 itself.
Link to the article: http://www.moneycontrol.com/india/news/market-outlook/bullish-on-jp-associates,-gmr-infra:-emkay-stock-brokers/327555
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