>JP Associates(Citi)

 Impressive big picture, as in the next 10 years JPA could be — 1) One of the
top three Indian cement companies; 2) Power portfolio of 7,515MW (3) Inhouse
EPC with a backlog of ~ Rs420bn; 4) One of the largest real estate
developers in India; and 5) Have 1,212km of expressways with tolling rights.
 However, getting there will be extremely tough — The success of JPA’s asset
heavy business is pinned on easy access to capital. On the capital side we
believe Yamuna Expressway needs an incremental ~ Rs36.6bn of funding,
mobilizing ~ Rs450bn for the Ganga Expressway. This is going to be a
Herculean task and financially closing all power projects will be extremely
difficult. Further the poor demand outlook for real estate and cement makes
the situation that much tougher for the company.
 Cutting target price to Rs87 (from 300 earlier) to factor in — 1) 21-22%
earnings cut; 2) Cut in construction EV/EBITDA 7x (12x); 3) Cut in cement
EV/ton to US$75 (US$120); 4) Cut in power assets value to Rs35bn (Rs69bn);
5) Cut in Jaypee Greens value to Rs5.4bn (Rs11.7bn); 6) Cut in Jaypee Hotels
value to Rs1.5bn (Rs4.9bn) and 7) Cut in Jaypee Infratech value.
 But we still maintain a Buy because — 1) Underlying parent businesses will
still generate Rs8-10bn average annual CFO; 2) Stock looks attractive as the
parent (cement, EPC and Jaypee Greens) business trades at adjusted P/E
multiples of 4.9x FY09E, which we believe is extremely cheap; and 3) Most of
the value in our new target price of Rs87 comes from cement, power and
construction, and not real estate.

To read full report JP Associate(Citi)