markettrend766
17-09-2008, 06:30 AM
JAIPRAKESH ASSOCIATES LTD
CMP:139.8
TARGET:202.28
TIME HORIZON 12 MONTHS
Business nature:-jaiprakash associates is an infrastructure conglomerate focused on eng& construction of hydro power stations ,cement, expressways &real estate .
It owns a controlling stake in two hydro plants totaling to 700 MW and is currently setting up another 1500Mwthermal power plants ,1000MW hydro unit and claims concession for another 3,245MW hydro stations. it is also doubling its cement capacity and has interests in hotels &hospitality sectors.
To win India’s largest Expressway.
JPA has emerged as the lowest bidder for potentially India’s largest expressway –
Ganga Expressway, in the state of Uttar Pradesh (UP), according to media
reports. Assuming a potential real estate component of 20,000 – 25,000 acres, we estimate this expressway could be worth Rs52 – Rs74/share. However, we would revisit these initial estimates once the visibility on the project improves. This project will have a positive impact on E&C, cement and project development businesses of JPA. Reiterate Buy with a PO of Rs530. The potential value creation includes a) Ganga Expressway b) F1 circuit and c) 720MW Meghalaya hydro projects.
Ganga expressway-an 8lane 1047kmsexpressway.
Ganga Expressway project is divided into four sectors ranging from 211 to
305kms (Table 1) with initial cost estimates Rs298bn (US$7.6bn).
Project: An 8-lane access controlled expressway from Greater Noida (Western U.P.) to Ballia (Eastern U.P.) on the left bank of the river ‘Ganga’ stretching 1,047kms.
Purpose: High speed connectivity between Western & Eastern UP (Chart 4) cutting the traveling time to a third i.e. 8 hours v/s 20-24 hours currently.
Sweetener: UP govt. to grant real estate development rights to JPA along the expressway to develop residential/ Industrial zones along the road across 20,000 – 25,000 acres.
Risks: This project exposes JPA significantly to one-state risk given that it is also implementing the Taj Expressway project in the same state. Besides, some political parties have objected to the project citing unfair deal to the people to be displaced by the project.
Valuations: JPA offers a blend of asset play & 36% CAGR in parent EPS over FY07-10E. Key stock triggers:
a) Private equity placement at JP Infratech & IPO of JP Power;
b) b) ACQ OF 165km land for Taj Expressway & 2nd parcel of real estate land bank at NOIDA;
c) c) visibility on development of Taj Expressway region like Greater NOIDA airport, F1 circuit and newly won projects – 720MW hydro project in Meghalaya.
While the stock appears attractive valuations current levels, we advice investors to buy the stock on below NAV due to asset-based nature of its business & holding company structure. JAP currently trading at Rs-134.85, we set a price target of Rs205 for JPA is based on its sum-of-the parts based valuation.up side of Rs 50% over 12 months time horizon.
Risks
a) Political / land acquisition hurdles at Taj Expressway,
b) slowdown in hydro power capex,
c) demand-supply imbalance in cement business and d) hydrology.
MARKETTREND766
dD TEAM
CMP:139.8
TARGET:202.28
TIME HORIZON 12 MONTHS
Business nature:-jaiprakash associates is an infrastructure conglomerate focused on eng& construction of hydro power stations ,cement, expressways &real estate .
It owns a controlling stake in two hydro plants totaling to 700 MW and is currently setting up another 1500Mwthermal power plants ,1000MW hydro unit and claims concession for another 3,245MW hydro stations. it is also doubling its cement capacity and has interests in hotels &hospitality sectors.
To win India’s largest Expressway.
JPA has emerged as the lowest bidder for potentially India’s largest expressway –
Ganga Expressway, in the state of Uttar Pradesh (UP), according to media
reports. Assuming a potential real estate component of 20,000 – 25,000 acres, we estimate this expressway could be worth Rs52 – Rs74/share. However, we would revisit these initial estimates once the visibility on the project improves. This project will have a positive impact on E&C, cement and project development businesses of JPA. Reiterate Buy with a PO of Rs530. The potential value creation includes a) Ganga Expressway b) F1 circuit and c) 720MW Meghalaya hydro projects.
Ganga expressway-an 8lane 1047kmsexpressway.
Ganga Expressway project is divided into four sectors ranging from 211 to
305kms (Table 1) with initial cost estimates Rs298bn (US$7.6bn).
Project: An 8-lane access controlled expressway from Greater Noida (Western U.P.) to Ballia (Eastern U.P.) on the left bank of the river ‘Ganga’ stretching 1,047kms.
Purpose: High speed connectivity between Western & Eastern UP (Chart 4) cutting the traveling time to a third i.e. 8 hours v/s 20-24 hours currently.
Sweetener: UP govt. to grant real estate development rights to JPA along the expressway to develop residential/ Industrial zones along the road across 20,000 – 25,000 acres.
Risks: This project exposes JPA significantly to one-state risk given that it is also implementing the Taj Expressway project in the same state. Besides, some political parties have objected to the project citing unfair deal to the people to be displaced by the project.
Valuations: JPA offers a blend of asset play & 36% CAGR in parent EPS over FY07-10E. Key stock triggers:
a) Private equity placement at JP Infratech & IPO of JP Power;
b) b) ACQ OF 165km land for Taj Expressway & 2nd parcel of real estate land bank at NOIDA;
c) c) visibility on development of Taj Expressway region like Greater NOIDA airport, F1 circuit and newly won projects – 720MW hydro project in Meghalaya.
While the stock appears attractive valuations current levels, we advice investors to buy the stock on below NAV due to asset-based nature of its business & holding company structure. JAP currently trading at Rs-134.85, we set a price target of Rs205 for JPA is based on its sum-of-the parts based valuation.up side of Rs 50% over 12 months time horizon.
Risks
a) Political / land acquisition hurdles at Taj Expressway,
b) slowdown in hydro power capex,
c) demand-supply imbalance in cement business and d) hydrology.
MARKETTREND766
dD TEAM