JP Associates highlighted acquisition of entire 165kms of Taj expressway (JPI) land, addition to & monetization of real estate land bank; improved execution at cement (19mt capacity in FY09E) & E&C businesses and 24-31% RoE at its power subs. JPA is one of our top Infra pick with potential PO upside of 89%.
This should create room to boost E&C revenues from 2HFY09E. JPA is likely to get ~160 acres of prime real estate landbank at NOIDA in a week, taking total to 1075 acres of 1250, as per expressway concession. This will help JP Infra (JPI) secure 39% of MLe SPV value, as this parcel accounts for 45% of MLe value of JPI. JPI has pre-sold 60% of its 1st realty project worth Rs15.5bn. JPI will develop 400mn.sq.ft. across 5 parcels (165kms).
JPA hopes to grow FY09E sales by 74%YoY led by 83% rise in E&C and real estate revenues and ~70% growth in cement sales. PAT is likely grow by 46%YoY to Rs8.9bn despite higher fixed costs from capex.
Sum of the Parts Valuation of JP Associates:
Infrastructure Rs 286 / share
Power Rs 137 / share
Cement Rs 82 / share
Hotels Rs 5 / share
Steel Rs 4 / share
Others Rs 14 / share
Net Debt -Rs 55 / share
The sum of the parts yield to Rs 473 / share of JP Associates. Ganga Expressway is not discounted in the current valuation.