Jaiprakash Associates - Buy on steep falls !

In Q4FY2011, Jaiprakash Associates Ltd (JAL) on a standalone basis posted a net profit of Rs302 crore (increased by 23.8% on a year-on-year [y-o-y] basis), which is below our expectation on account of a lower than expected profitability in the construction and real estate division. However, the performance of its cement division was in line with our estimates and partially negated the impact of the poor performance of the construction division.

JAL’s revenues grew by 21.4%y-o-y to Rs 3,982 crore in Q4FY2011 which is ahead of our estimates. The impressive revenue growth has been largely driven by a strong revenue growth posted by its cement division (of 28.8%; supported by volume growth) and the stupendous revenue growth in its real estate division (of 379.8%). However, the performance of the construction division suffered during the quarter and declined by 10.8% y-o-y to Rs1,761 crore due to the completion of the Karcham Wangtoo project and on slow execution of the Yamuna Expressway project, both of which are key projects for the company.

The operating profit margin (OPM) contracted by 267 basis points y-o-y to 21.4% in Q4FY2011 on account of a sharp decline in the construction divisions earnings before interest and tax (EBIT) margin (declined by 8 percentage points to 12.4%) which was due to the completion of the relatively high margin Karcham Wangtoo project. Further, the profitability of the cement division also contracted by around 10 percentage pointsy-o-y to 14%. However, a sharp increase in the EBIT of the real estate division to 47.9% in the current quarter as compared to 31.2% in Q4FY2010 has restricted the overall OPM contraction to 267 basis points. Consequently the operating profit grew by 7.9% (as compared to a 21.4% growth in the revenue) to Rs 851 crore.

The interest and depreciation outgo were higher by 35.4% and 13.1% respectively on a y-o-y basis on account of capacity addition in the cement division and installation of captive power plants. However, on account of the higher than expected other income (increased by 18.5% y-o-y) due to dividend received by Jaypee Infratech and lower than expected effective tax rate of 22.1% as compared to 43.7% in Q4FY2010, the company managed to register a 23.8% earnings growth.

For the full year FY2011 the company has delivered a net sales growth of 28.5% to Rs 12,966 crore. However, on account of margin contraction and a surge in the interest and depreciation charges, the adjusted standalone earnings of the company have declined by 7.5% to Rs 653 crore.

We have re-visited our earnings estimates for FY2012 and FY2013 mainly to factor in the delay in the execution of the Yamuna Expressway project and the overall margin pressure. Consequently the revised earning per share (EPS) estimate for FY2012 and FY2013 works out to Rs 4.4 and Rs 5.7 respectively.

We continue to like JP Associates due to its diversified business model and aggressive expansion plan. In terms of valuation, we continue to value the stock using the sum-of-the parts (SOTP) valuation methodology and arrive at a value of Rs130 per share. We maintain our BUY recommendation on the stock with a revised price target of Rs130. At the current market price, the stock is trading at a price earning (PE) of 18.7x FY2012E and 14.6x FY2013E earnings.

Our Recommendation :

The way the scrip has been falling looks like it will reach Rs.50 levels sooner than later. The following chart shows results of this scrip for the last 1 year.

Time Span	Price	Change	%Change
Today	63.85	2.45	3.99
Week	64.45	-3.05	-4.73
Month	79.65	-18.25	-22.91
Three Months	86.85	-25.45	-29.30
Six Months	76.15	-14.75	-19.36
One Year	118.40	-57.00	-48.14
Two Years	145.44	-84.04	-84.04
Three Years	122.34	-60.94	-49.81

Our Recommendation :

Long term investors should look to buy the scrip around Rs.50 levels and hold for a period of 2-3 years for a target price of Rs.90 giving a bumper profit of 80% on investment. A staggered buying strategy should bring down the acquisition costs in this high beta stock which can swing wildly both on the up and down sides !

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TA - JP Associates

Jaiprakash Associates (Rs 111.6): In our review of this stock in September 2008, we had indicated that the long-term outlook for Jaiprakash Associates had turned negative and that it could decline to Rs 93 or Rs 56.

The stock bottomed at Rs 47 on October 27, 2008 and had been moving sideways with a positive bias since then. Immediate resistances for the stock are at Rs 128 and Rs 146. Failure to move above these levels will result in a sideways move between Rs 60 and Rs 170 for a few more months.

Rally above Rs 170 will pave the way for a move to Rs 220. We do not envisage a move above Rs 220 this calendar year. If the stock manages to do so, next long-term target is Rs 320.

Source : businessline 19-04-09

Our Recommendation :
Our Research Team Views :

Day High Low Rs.122-107
Monthly High Low Rs.80-128
6M H/L Rs. 215-70

This share has risen sharply more than 90% in the last 2 months. The following  are the ideal ranges for buying and selling :

Buying Range : Rs.85-90
Selling Range : Rs. 115-125

Wait for the price to the buying range on correction in the stock markets.

Holding period : 6  months
Returns expected : 75% plus

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Market cues and Share Tips 16 Feb 2009

Markets scaled a five-week high on expectations of stimulus measures in the interim Budget and a rate cut from RBI to ‘support’ the economy.

On the Bombay Stock Exchange, the Sensex closed 334 points higher at 9,635 and the Nifty on the National Stock Exchange gained 105 points to close at 2,948 during the week ended. Market breadth improved and sharp moves in many midcap and smallcap stocks reflect wider participation by market players.

While positive cues like fall in inflation to a one-year low and changes in FDI norms ‘boosted’ markets, negatives like weak global cues, weak IIP numbers and revision of GDP projecting slower growth kept the bulls on leash.

Fears over deepening rece-ssion and uncertainty in global equity markets are prompting investors opt for gold and silver. Punters exp-ect gold to cross $1,000 an ounce mark very soon.

Market players caution investors against “unreasonable expectations” regarding the Vote-On-Account. Chartists predict a trading band of 9,200-10,400 for the Sensex and 2,820-3,100 for the Nifty in the week ahead.

The Sensex and the Nifty could face resistance at 9,840 and 2,980, if rise abo-ve these levels, the indices may touch 10,600 and 3,150 levels in the near term.

Be bearish below 9,380 and 2,860 level on the indices on closing basis.

With no major trigger left after interim Budget, markets are likely to move in a broad range of 8,400-11,000 (Sensex) and 2,600-3,200 (Nifty) for next few weeks.

Don’t trade on the basis of tips. In other words, “trade with the trend, not your friend.” Get accurate information. Always demand facts, not opinions.

SATTA GUPSHUP

* Orient Paper and Inds is a diversified company with interests in paper, cement and fans. Its plants are strategically located in stro-nger growth markets of the south and the west. Buy value is Rs 25, trailing twelve month EPS is Rs 10 and the last dividend was 120 per cent. Buy at current levels for a medium-term target of Rs 33.

* Auto component major Bharat Forge is reportedly increasing focus on non-automotive businesses like railways, aerospace, power, marine and construction equipment. With commissioning of new facilities at Baramati and Mundhwa, sources indicate that share of non-automotive business to increase to 30 per cent. Buy in the present correction for portfolio.

* Allcargo Global Logistics is a logistics company operating in seven key areas of logistics. Its third quarter results were better than expectations due to its dive-rsified mix. Buy on declines for strong returns in the medium term.

* Recent coverage by some institutions triggered buying in Hind Dorr and Take Solutions. Chennai-based Take Solutions is a supply chain management and life sciences product company. Hi-nd Dorr is primarily in water infrastructure management with significant EPC business. Buy both the counters on declines for returns in the medium term.

* Onmobile is a pioneer and leader in the Indian VAS market having nearly all telecom operators as its clients. It is reportedly planning to tap international market. Buy on declines for unexpected sharp gains.

F & O

Mirroring the strong bullish undertone in the markets, brisk trading volumes were seen in derivatives segment. Overall open interest shot up to a three-month-high and stock futu-res saw a highest open interest addition since September 2006 reflecting ‘confidence’ of the traders over near-term strength of the rally. However, ‘quick’ unwinding of positions is not ruled out on evidence of negative surprises.

Sector-specific and long-term build-up was seen in cement, auto, fertiliser and metal counters. A modest and short-term build-up was seen in construction, infra and banking stocks.

Stocks that witnessed positive open interest build up are Adlabs, Balrampur Chini, Shree Renuka, Idea, R Comm., Power Grid, PTC, PFC, TV-18, Dish TV, RIL, RPL, LIC Hsg, Nalco and Crompton Greaves.

Inclusion of PowerGrid in MSCI index has triggered renewed buying in the counter. Buy on declines for a target price of Rs 125.

A sharp rally likely in RPL and JP Associates, say punters. The rally in media stocks to continue for some more time, say industry watchers. Stay invested for further gains.

Telecom counters witnessing a renewed buying interest from funds. Buy Idea and RComm. for a target price of Rs 65 and Rs 220 respectively in the near-term.

More sweet returns indicated in sugar counters. Use declines to accumulate. Cement and metal counters are attracting good buying on reports of better dispatches and modest improvement in price trends. Stay invested for further gains.

Though luck plays a great role in speculation, it demands cool judgment, courage, pliability and prudence.

Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.

Source : deccan.com

Tags : Idea, RComm, RPL, JP Associates, Adlabs, Balrampur Chini, Shree Renuka, Idea, R Comm., Power Grid, PTC, PFC, TV-18, Dish TV, RIL, RPL, LIC Hsg, Nalco, Crompton Greaves.