JPA is set to be among the top five players in India in power, cement and real-estate. Tripling of cement capacity in three years, sale of 17m sq ft residential projects within two years of launch, and rapid execution of thermal power projects lend credibility to the ambitious plans. We estimate 19.7% EPS CAGR over
FY09-12, based on a 42% CAGR in cement volumes and construction of captive power projects.
Cement—strongest volume growth among Indian companies: Production ramp-up at newly commissioned capacities alone would translate into 42% CAGR in cement volumes over FY10-12. This would result in 34% CAGR in EBIT over the period, after factoring in an 8% fall in realisation. We estimate JPA’s cement capacity will reach 29.4mtpa by end-FY12, making the company the third largest cement producer in India. There are upsides to our estimates, as the company aims to achieve capacity of 35.6mtpa by end-FY12.
Real-estate—strong visibility on monetisation: In Noida-Greater Noida region, JPA has sold 17m sq ft within two years of launch. Owing to ~Rs1,000 psf land cost advantage, the company can undercut competition in any external environment as reflected in 52-62% cut in prices in recent launches, as compared to the initial launch. Large contiguous land bank should enable monetisation at much higher prices once the network effect of a large township kicks in.
Power—on track to expand capacity to 9GW by FY15: Jaiprakash Power Ventures recently raised Rs36.7bn through a US$200m FCCB issue and securitisation of receivables from operational projects. This money should suffice till mid-FY13, and thus provides ample implementation visibility for three thermal power.
Adjusting for value of subsidiaries, our target price of Rs180 translates into standalone FY11ii PER of 6.4x. BUY.
