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Reduce JP Associates; target of Rs 112: Angel Broking

Posted on: May 6th, 2009 and is filed under Brokerage Recommendations.

Angel Broking has recommended a reduce rating on Jaiprakash Associates, with price target of Rs 112, in its report dated May 4, 2009.

“Jaiprakash Associates is one of the largest Infrastructure conglomerates in India with a presence in varied sectors like Cement, Real Estate, Power and Construction and EPC (C&EPC). JAL targets to become one of the Top-3 cement companies, be one of the largest Real Estate developers in India, have a Power portfolio of 5,945MW, and have 1,212 km of Expressways with tolling rights. Our estimates suggest that JAL would require Rs 50,000 crore of funding (particularly for the Yamuna and Ganga Expressway projects), which we believe would be a herculean task to achieve. Further, achieving financial closure for all its power projects would also be difficult.”

“Moreover, considering the poor demand outlook for the Real Estate Sector and the challenges emerging in the Cement Sector in terms of an oversupply situation getting created, we believe the going may be tough for the company. This makes us apprehensive of the returns from JAL’s expansion plans and thus Initiate Coverage on the stock with a Reduce rating and SOTP target price of Rs 112/share, implying a downside of 20% from current levels,” says Angel Broking’s report.

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