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BUY JP Associates – ML + Sharekhan

November 22, 2007

We had an exclusive coverage of Jaiprakash Associates [JP Associates] last month. Now Merill Lynch and Sharekhan have upgraded the stock.

JPA has launched the first tranche of a 3mn sq. ft development (see Chart 4) at its NOIDA land bank. Sales at JP Greens are likely to be robust at >1mn sq. ft in FY08E. The initial response to the bookings appears to be very strong, as the average rate stands at Rs6,000 per square foot. Formula 1 Holdings has confirmed signing a contract with JPSK Sports (subs. of JPA) to stage the first-ever F1 Grand Prix at NCR, India in 2010. We think F1 circuit will be accompanied with related land bank, which would justify investment.

According to media reports, ICICI Venture Funds Management is planning to invest about USD800 million (Rs3,148 crore) to pick up a stake in Jaypee Infratech, which is a unit of the Jaypee group’s listed entity, JP Associates.

Sum of the Parts valuation as given by Merill Lynch,
Infrastructure – Rs 1288
Cement – Rs 398
Power – Rs 335
Hotels Rs 23
Steel – Rs 21
Projecta @ Book Value – Rs 82
Minus Debt – Rs 343

JP Associates Per share Value – Rs 1,805. This is also the target price set by ML. Sharekhan has set a Target Price of Rs 2025 on JP Associates.

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