Jaiprakash - Investor's Eye Sharekhan

Jaiprakash Associates
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs390
Current market price: Rs269
Results above expectations
Result highlights
Jaiprakash Associates Ltd (JAL) Q4FY2008 results were above our estimates. On a standalone basis the company reported a top line growth of 44.5% year on year (yoy) to Rs1,280 crore. This was on account of a 45.7% year-on-year (y-o-y) growth in the revenues from the construction division to Rs475 crore. The higher revenue was also aided by the revenue from the real estate division, which stood at Rs256 crore against nil during the corresponding period last year.
The operating profit margin (OPM) on a standalone basis for the quarter improved by 140 basis points yoy to 31.1%. This was mainly on account of higher earning before interest and tax (EBIT) margin of the construction division, which reported an increase of 950 basis points to 25.5%. The real estate division reported an EBIT margin of 31.6%, while the cement division reported a negligible improvement of 30 basis points in EBIT margin to 35.3%. However the hotel and hospitality division reported a decline of 1,190 basis points in the EBIT margin to 16.7%. Consequently the operating profit jumped by 51.3% to Rs398 crore.
On a standalone basis, the company reported a net profit after tax (PAT) of Rs211 crore, up by 61.1% yoy. The growth in the net profit was mainly because of an increase in the other income by 120% to Rs66 crore.
For the year ended March 2008, on a standalone basis the net sales increased 14.6% yoy to Rs3,985 crore and the PAT stood at Rs610 crore, up 47% yoy. On a consolidated basis, the net sales increased by 6.8% to Rs4,201 crore and the adjusted PAT stood at Rs627 core, an increase of 21.2% yoy.
We have upgraded our FY2009 earnings per share (EPS) estimate by 10.9% to Rs6 and have also introduced FY2010 estimates. The estimated PAT for FY2010 stands at Rs947.9 crore, implying a growth of 26.4% over FY2009E. At the current market price of Rs269, the stock is trading at 45x its FY2009E EPS and 35x its FY2010E EPS. We maintain a Buy on the stock with a price target of Rs390 based on our sum-of-the-parts valuation.