>Jaiprakash Associates Limited (MORGAN STANLEY)

Adjusting Price Target for Higher Liquidity Environment

Investment conclusion:
Over the next two to three years, we expect Jaiprakash to emerge as a top-5 player in India in each of its main businesses – cement, construction, power, and real estate. We believe that
with worries on execution and funding receding a bit (given the strong results and the easing debt funding environment), the stock can trade above our base case. We add 30% of the differential between our base and bull case to our base case to set our PT of Rs166, which
implies potential upside of 27% from current level.

Strong Results Ease Execution Issues:
Jaiprakash declared a strong set of numbers in F4Q09, with its construction and real estate businesses driving revenues and profits up 55% YoY and 52% YoY, respectively. With the company also commissioning 2.5 mn tons of cement capacity in F4Q09, and taking their
presales on Yamuna Expressway up to 5.23 mn sq ft (0.73 mn sq ft in F4Q09), we believe that execution worries have reduced.

Debt Funding Availability Easing from Crunch in
F3Q09: Our interaction with banks also reveals that debt funding in no longer as difficult to secure as in F3Q09. We continue to expect the company to use presales of real estate, sale of treasury stock, and discounting of power asset cash flows to fund the equity requirements
of their planned power generation assets.

What’s next:
We believe that declaration of financial closure on the company’s generation projects (especially Bina and Nigrie) will be a driver of stock price. Also, we believe the execution of the projects it has in hand (especially the internal ones) will reassure the market, driving the multiple and the stock price up.

To see full report: JAIPRAKASH ASSOCIATES