CMP (Rs) 67.75

Target Price (Rs) 77.00

ISIN: INE455F01025

Mar 4th

, 2013

JAIPRAKASH ASSOCIATES LIMITED Result Update: Q3 FY13

HOLDHOLDHOLDHOLD

Stock Data

Sector Construction & Engg.

BSE Code 532532

Face Value 2.00

52wk. High / Low (Rs.) 106.75/58.05

Volume (2wk. Avg ) 2009000.00

Market Cap ( Rs in mn ) 145994.48

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY12A FY13E FY14E

Net Sales 128531.20 134237.99 143634.65

EBITDA 37102.30 36037.60 38636.19

Net Profit 10263.80 5332.93 4152.41

EPS 4.83 2.47 1.93

P/E 14.04 27.38 35.16

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX JAIPRAKASH ASSOCIATES

SYNOPSIS

Jaiprakash Associates Ltd. (JAL) is the engineering and construction arm of the Jaypee group focused on development of river valley and hydro electric projects since 1996.

During the quarter, the robust growth of Net Sales is increased by 3.80% to Rs. 34308.70 millions.

Jaiprakash Associates has raised Equity Funds to the extent of Rs. 532.90 crores by allotment of 6,42,04,810 equity shares of Rs. 2/- each at an issue price of Rs. 83/- per share to Qualified institutional Buyers through QIP issue of USD 100 million.

During the quarter FCCB aggregating USD 3,96,00,000 have been converted onto 2,84,45,567 Equity Shares of Rs. 2/- each at a predetermined price of Rs. 77.50 per share.

Jaiprakash Associates entered into a JV Agreement with Madhya Pradesh State Mining Corporation Ltd for Coal Mining at Amelia Coal Block in Madhya Pradesh.

Jai Prakash acquired Bina Power Supply Company from the Aditya Birla Group to set up a 1500 MW coal fired thermal power plant at Bina in Madhya Pradesh.

The company has won two contracts by Mangdechhu Hydroelectric Project Authority, Bhutan for construction of the two contract packages pertaining to 720 MW Mangdechhu Hydroelectric Project.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Jaiprakash Associates Ltd 67.75 145994.48 4.83 14.04 1.17 25.00

L&T Ltd 1364.80 839878.80 81.95 16.65 3.33 825.00

Jindal Saw Ltd 90.15 24777.20 7.51 11.94 0.70 50.00

Punj Llyod Ltd 39.45 13101.20 0.99 39.85 0.34 7.50

Investment Highlights

Results updates- Q3 FY13,

Jaiprakash Associates Ltd is the engineering and

construction arm of the Jaypee group focused on

development of river valley and hydro electric

projects and a leader in construction of river valley

and hydropower projects on turnkey basis for more

than four decades, reported its financial results for

the quarter ended 31st Dec, 2012.

Months Dec-12 Dec-11 % Change

Net Sales 34308.70 33053.90 3.80

PAT 1109.30 2049.50 (45.87)

EPS 0.51 0.96 (46.59)

EBITDA 8809.80 9380.00 (6.08)

The company’s net profit decreased to Rs.1109.30 million against Rs.2049.50 million in the corresponding

quarter ending of previous year, a decrease of 45.87%. Revenue for the quarter increased 3.80% to Rs.34308.70

million from Rs.33053.90 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs.0.51 a share during the quarter, registering 46.59% decrease over previous year period.

Profit before interest, depreciation and tax is Rs.8809.80 millions as against Rs.9380.00 millions in the

corresponding period of the previous year.

Expenditure :

During the quarter total expenditure increased

by 19 per cent mainly on account of increase in

Direct Construction, Manufacturing, Hotel/

Hospitality and Power Expenses. Total expenditure

in Q3FY13 was at Rs. 28171.40 million as against Rs.

23692.20 million in Q3FY12. Direct Construction,

Manufacturing, Hotel/Hospitality and Power

Expenses is at Rs. 12218.30 millions against Rs.

10504.70 millions in the corresponding period of

the previous year. Other Expenditure was at Rs.

4990.80 million and Cost of Material Consumed

Expenses is Rs. 8575.00 million in Q3 FY13 are the

primarily attributable to growth of expenditure.

Segment Revenue

Latest Updates

• Jaiprakash Associates has raised Equity Funds to the extent of Rs. 532.90 crores by allotment of 6,42,04,810

equity shares of Rs. 2/- each at an issue price of Rs. 83/- per share to Qualified institutional Buyers through

QIP issue of USD 100 million.

• During the quarter FCCB aggregating USD 3,96,00,000 have been converted onto 2,84,45,567 Equity Shares

of Rs. 2/- each at a predetermined price of Rs. 77.50 per share.

• Jaiprakash Associates Limited had entered into a JV Agreement with Madhya Pradesh State Mining

Corporation Limited for Coal Mining at Amelia (North) Coal Block in Sidhi District of Madhya Pradesh. For

this purpose, Madhya Pradesh Jaypee Minerals Limited had been incorporated who had appointed JAL as

Mine Developer cum Operator for the mines the produce whereof is committed to be supplied to Jaypee

Nigric Super Thermal Power Project being implemented by Jaiprakash Power Ventures Limited.

• Jaiprakash acquired Bina Power Supply Company from the Aditya Birla Group to set up a 1500 MW coal fired

thermal power plant at Bina in Madhya Pradesh.

• The company has won two contracts by Mangdechhu Hydroelectric Project Authority, Bhutan for

construction of the two contract packages pertaining to 720 MW Mangdechhu Hydroelectric Project located

in Trongsa District Bhutan.

• Jaiprakash Power Ventures, a subsidiary of Jaiprakash Associates, has a diversified business model across

hydro and thermal, in the ratio of 40:60 in north, central and north-eastern regions of the country. It has an

installed capacity of 1,700 MW.

Company Profile

Jaiprakash Associates Ltd. (JAL), the flagship company of the Jaypee Group, was incorporated in 1996. In 2003

JAL was formed due to merger of Jaiprakash Industries (JIL) and Jaiprakash Cement (JCL).

JAL is the engineering and construction arm of the Jaypee group focused on development of river valley and

hydro electric projects and a leader in construction of river valley and hydropower projects on turnkey basis for

more than four decades. The company is currently executing various projects in hydropower / irrigation / other

infrastructure fields and has had the distinction of executing simultaneously 13 hydropower projects spread

over six states and the neighboring country Bhutan for generating 10,290 MW of power. Jaiprakash Associates

Ltd. is ISO 9001:2008 certified company, accredited by UKAS and NABCB.

The Jaypee Group is a diversified infrastructure conglomerate and has a formidable presence in Engineering &

Construction along with interests in the power, cement and hospitality. The infrastructure conglomerate has also

expanded into real estate & expressways. The group has been assigned “CR1” grade by ICRA Ltd indicating very

“Strong Contract Execution Capacity with best prospects of timely completion of projects without cost overruns

etc. for projects with average value of Rs.2500 crores.” It is the only group in India, which pre-qualifies on its own

for the bidding of various projects that are awarded in the country.

The Jaypee Group is a Rs 6,500 crore well diversified infrastructural industrial conglomerate in India. Over the

decades it has maintained its salience with leadership in its chosen line of businesses. Jaypee group is the 3rd

largest cement producer in the country. The group produces special blend of Portland pozzolana cement under

the brand name ‘Jaypee Cement’ (PPC).

The Jaypee Group undertakes projects involving:-

Projects under Execution

• Sardar Sarovar(Narmada) Project ,Gujarat

• 900 MW Baglihar Hydroelectric Project,J & K

• Alimineti Madhav Reddy Project (AMRP), Andhra Pradesh

• Yamuna Expressway Project, Uttar Pradesh

• Zirakpur-Parwanoo Highway, Punjab, Haryana and Himachal Pradesh

• 990 MW Punatsangchhu II Hydroelectric Project, Bhutan

Projects

• Large quantities of rock excavation (both surface and underground)

• Controlled earth/rock fill

• Concrete manufacture and placement (including chilling)

• Fabrication and erection of penstock liners

• Hydro-mechanical equipment procurement and erection

• Steel Structures

• Expressway Construction

• Real Estate Development

The Group is a pioneer in the development of India’s first golf centric real estate. Jaypee Greens -- a world class

fully integrated complex consists of an 18 hole Greg Norman Golf Course. Stretching over 450 acres, it also

includes residences, commercial spaces, corporate park, entertainment and nature in abundance.

Business area of the company:

Jaiprakash Associates- The engineering and construction wing of the Group is an acknowledged leader in the

construction of multi-purpose river valley and hydropower projects. It has had the unique distinction of

executing simultaneously 13 hydropower projects spread over 6 states and the neighboring country Bhutan for

generating 10,290 MW of power.

The 900 MW Baglihar (Stage-I and II) hydroelectric project in Jammu & Kashmir, in the challenging environment

of the State with 22 million cubic meters of concrete, has been the largest EPC project executed in the country in

hydropower sector, so far.

Business Divisions:

• Civil Engineering

• Private Hydro Power

• Cement

• Hospitalitty

• Integrated Towenship

• Information Technology

• Expressway

• Sports

• Agri Business

Other group companies:

• Jaypee Hotels Limited (JHL)

• Jaiprakash Hydro-Power Limited (JHPL)

• Jaiprakash Power Ventures Limited (JPVL)

• Jaypee Karcham Hydro Corporation Limited

(JKHCL)

• Jaypee Cement Limited (JCL)

• Jaypee Power Grid Ltd.(JPL)

• Gujarat Anjan Cement Limited (GACL)

• Jaypee Infratech Limited (JIL)

• Jaypee Ganga Infrastructure Corporation

Limited (JGICL)

• JPSK Sports Private Limited (JPSKSPL)

• Gujarat Jaypee Cement & Infrastructure Limited

(GJCIL)

• Bhilai Jaypee Cement Limited (BJCL)

• Himalayan Expressway Ltd.

• Madhya Pradesh Jaypee Minerals Limited

(MPJML)

Financial Highlight

Balance sheet as at March31st, 2012

(A*- Actual, E* -Estimations & Rs. In Millions)

Particulars March (Rs.in.mn) FY12A FY13E FY14E

EQUITY AND LIABILITIES:

Shareholders’ Funds:

a) Share Capital 4252.90 4309.80 4309.80

b) Reserves and Surplus 118790.10 124123.03 128275.44

1. Net worth (a+b) 123043.00 128432.83 132585.24

Non-Current Liabilities:

Long-term borrowings 150370.00 141347.80 144174.76

Deferred Tax Liabilities [Net] 12437.20 12810.32 13066.52

Other Long Term Liabilities 16087.80 18340.09 19440.50

Long Term Provisions 1326.30 1657.88 1889.98

2. Total Non-Current Liabilities 180221.30 174156.08 178571.75

Current Liabilities:

Short-term borrowings 10792.90 8958.11 8241.46

Trade Payables 22255.00 25593.25 27896.64

Other Current Liabilities 69837.30 90090.12 106306.34

Short Term Provisions 1293.70 1474.82 1563.31

3. Total Current Liabilities 104178.90 126116.29 144007.75

Total Liabilities ( 1+2+3 ) 407443.20 428705.20 455164.74

ASSETS:

Non-Current Assets:

Fixed Assets:

Tangible Assets 108952.50 106773.45 111044.39

Intangible Assets 494.10 543.51 570.69

Capital work-in-progress 44815.20 41229.98 39580.78

a) Total Fixed Assets 154261.80 148546.94 151195.86

b) Other non-current assets 15689.00 16159.67 16482.86

c) Non Current Investments 65455.00 68073.20 69434.66

d) Long Term Loans and Advances 11745.50 10218.59 9503.28

1. Total Non-Current Assets 247151.30 242998.40 246616.67

Current Assets:

Current Investments 3369.70 2931.64 2814.37

Inventories 16914.90 17084.05 17938.25

Projects Under Development 23363.10 28035.72 31119.65

Trade Receivables 28663.70 37262.81 43970.12

Cash and Bank Balances 10222.30 8995.62 9895.19

Short Term Loans and Advances 31346.40 32913.72 34230.27

Other Current Assets 46411.80 58483.24 68580.23

2. Total Current Assets 160291.90 185706.80 208548.07

Total Assets ( 1+2 ) 407443.20 428705.20 455164.74

Annual Profit & Loss Statement for the period of 2011 to 2014E

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 132151.20 128531.20 134237.99 143634.65

Other Income 1035.90 2644.90 1913.68 2009.36

Total Income 133187.10 131176.10 136151.67 145644.01

Expenditure -95622.10 -94073.80 -100114.06 -107007.82

Operating Profit 37565.00 37102.30 36037.60 38636.19

Interest -13941.80 -17817.40 -21015.60 -24378.10

Gross profit 23623.20 19284.90 15022.00 14258.10

Depreciation -6078.10 -6141.50 -7202.96 -8283.40

Profit Before Tax 17545.10 13143.40 7819.05 5974.70

Tax -5867.30 -2879.60 -2486.12 -1822.28

Net Profit 11677.80 10263.80 5332.93 4152.41

Equity capital 4252.90 4252.90 4309.80 4309.80

Reserves 87695.20 118790.10 124123.03 128275.44

Face value 2.00 2.00 2.00 2.00

EPS 5.49 4.83 2.47 1.93

Quarterly Profit & Loss Statement for the period of 30th June, 2012 to 31st March, 2013E

Value(Rs.in.mn) 30-Jun-12 30-Sep-12 31-Dec-12 31-Mar-13E

Description 3m 3m 3m 3m

Net sales 30081.30 30049.90 34308.70 39798.09

Other income 285.40 223.30 851.50 553.48

Total Income 30366.70 30273.20 35160.20 40351.57

Expenditure -21913.90 -21881.80 -26350.40 -29967.96

Operating profit 8452.80 8391.40 8809.80 10383.60

Interest -4652.60 -4643.60 -5327.00 -6392.40

Gross profit 3800.20 3747.80 3482.80 3991.20

Depreciation -1763.30 -1777.60 -1812.90 -1849.16

Profit Before Tax 2036.90 1970.20 1669.90 2142.05

Tax -648.50 -690.10 -560.60 -586.92

Net Profit 1388.40 1280.10 1109.30 1555.13

Equity capital 4252.90 4252.90 4309.80 4309.80

Face value 2.00 2.00 2.00 2.00

EPS 0.65 0.60 0.51 0.72

Ratio Analysis

Particulars FY11 FY12 FY13E FY14E

EPS (Rs.) 5.49 4.83 2.47 1.93

EBITDA Margin (%) 28.43% 28.87% 26.85% 26.90%

PBT Margin (%) 13.28% 10.23% 5.82% 4.16%

PAT Margin (%) 8.84% 7.99% 3.97% 2.89%

P/E Ratio (x) 12.34 14.04 27.38 35.16

ROE (%) 12.70% 8.34% 4.15% 3.13%

ROCE (%) 14.20% 15.22% 14.53% 15.12%

Debt Equity Ratio 2.34 1.31 1.32 1.34

EV/EBITDA (x) 8.91 7.95 8.50 8.12

Book Value (Rs.) 43.24 57.86 59.60 61.53

P/BV 1.57 1.17 1.14 1.10

Charts

Outlook and Conclusion

� At the current market price of Rs.67.75, the stock P/E ratio is at 27.38 x FY13E and 35.16 x FY14E

respectively.

� Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.2.47 and Rs.1.93

respectively.

� On the basis of EV/EBITDA, the stock trades at 8.50 x for FY13E and 8.12 x for FY14E.

� Price to Book Value of the stock is expected to be at 1.14 x and 1.10 x respectively for FY13E and FY14E.

� We recommend ‘HOLD’ in this particular scrip with a target price of Rs.77.00 for Medium to Long term

investment.

Industry Overview

India's construction & engineering industry has proved its mettle to the world, as more and more engineering

companies are offering their services to their international clients. Giving the benefits of cost savings and faster

learning, Indian construction & engineering sector is enjoying huge investments as many of the multinational

national companies (MNCs) are setting up their research and development (R&D) centres in the country. "Global

automotive or aerospace companies are increasingly asking Indian companies to co-develop a product instead of

working on specifications set by them such as building infotainment systems inside a car or new wing technology

for an aircraft," said Suvojoy Sengupta, Managing Director, India, Booz and Co.

Moreover, a recent study by Kauffman Foundation, has found out that about 33.2 per cent of the co-founders of

engineering and technology companies incorporated in the US over 2006-12 were Indians. The study - America's

New Immigrant Entrepreneurs: Then and Now - was conducted among a random sample of 1, 882 companies of

the total 107, 819 engineering and technology companies founded in the last six years in the US.

India is also transforming into a research hub for the global companies. India spends around 0.9 per cent of gross

domestic product (GDP) on R&D. Since R&D is the basic constituent of promoting innovation, Indian

entrepreneurs as well as the Government are highly focussed to augment the culture of research in the country.

About 6, 000 patent applications were filed by Indians in 2010, which formed 0.3 per cent of the total

applications filed in the world. Hence, there lies a lot of scope for development and investment in the area.

Exports

The US and Europe together account for over 60 per cent of India's total engineering exports. Engineering

exports from India amounted to US$ 36 billion during April-November 2012.

During 2011-12, engineering exports grew 17 per cent to US$ 58.2 billion, as against US$ 49.7 billion in the

previous fiscal.

Engineering exports include transport equipment, capital goods, other machinery/equipment and light

engineering products like castings, forgings and fasteners.

Design & Engineering- Key Developments and Investments

The miscellaneous mechanical and engineering industries' sector-wise foreign direct investments (FDI) inflows

from April 2000 to October 2012 was calculated at US$ 2, 282.02 million, as per the Department of Industrial

Policy and Promotion (DIPP).

• India's largest utility vehicle and tractor maker Mahindra & Mahindra (M&M) intends to tap highly skilled

automotive talent pool of the US by commencing a technical centre in Troy, Michigan. The region's design and

consulting service resources are expected to support the company's automotive and tractor engineering

requirement in India.

Mahindra & Mahindra already has a significant presence in North America with businesses ranging from

information technology (IT) to tractors to aerospace

• Havells India Limited, a US$ 1.3 billion leading Fast Moving Electrical Goods (FMEG) company and power

distribution equipment manufacturer has launched India's first large scale lighting fixture plant at Neemrana,

Rajasthan. The company infused a capital of Rs 100 crore (US$ 18.2 million) to build this state-of-the-art

plant as a part of its strategy to strengthen its position in the fast growing and rapidly emerging lighting

fixtures market in India. The plant, currently employing around 250 people, will cater to both, consumer and

industrial lighting applications. It will also help to effectively control production efficiency and quality, widen

customer responsiveness and reduce delivery response time

• Shriram EPC Ltd has won a US$ 230 million contract for setting up a storm water and sewer system in Basra,

Iraq. The order would be executed through a joint venture (JV) with the Mokul Group, a global service

provider present across diverse industries. The scope of the order involves setting up a basic sanitary system

in Basra, including engineering, supply, installation of pipelines, pumping stations and road works

Government Initiatives

• The Indian government has been really pro-active in promoting R&D activities and improving engineering

services in the country. With support from the World Bank, the Government has been conducting the

'technical education quality improvement programme', under which 127 engineering institutions were

covered for quality improvement in its first phase from 2002 to 2009. In the second phase, from 2010 to

2014, it aims to cover another 190 engineering institutions

• Japanese industrial solutions company, Hitachi is in advanced talks with the Gujarat government for setting

up of a sea water desalination plant in the state that will treat 3.36 lakh tonnes of water on a daily basis.

The investment over the construction of the facility would be made through Indo-Japan joint investment

strategy and the plant would be executed by four partners. The plant, to be developed under Build-Own-

Operate-Maintain (BOOM) model, is scheduled to be operational by 2015

Road Ahead

Owing to availability of skilled talent pool coupled with a shortage of engineers in the developed markets, Indian

engineering service providers are expected to witness immense growth, according to a report released by

Nasscom and Booz and Company.

Flexible business models, shorter product life cycles of engineering companies, decreasing time to market and

flexibility in offering end products are certain factors that provide an edge to the Indian engineering companies.

Indian engineering research and development (ER&D) market is expected to add to future growth with

automotive, consumer electronics and telecom contributing by over 50 per cent to off-shoring revenues by 2020,

wherein the ER&D outsourcing industry is poised to reach US$ 37- 45 billion by then. This will be about 35 per

cent of the overall ER&D market, which is estimated to reach US$ 118 billion by 2020. Currently, Indian ER&D

market is pegged at around US$ 10.2 billion.

The growth would be propelled by the development in sectors such as chemical, medical and automotive. In

addition to that, the Government is anticipated to encourage engineering in India through investments in

infrastructure development in 2012-17 in telecom and energy and construction sector, the report added.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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