Jaypee Infratech Ltd is a subsidiary of Jaypee Associates Ltd, where the promoter holds about 74% stake in the company. Jaypee Infratech is in the businesses of operating the Yamuna Expressway, which connects Noida with Agra, a distance of 165 kms, and is also developing 5 land parcels with a cumulative area of 6100 acres along the Expressway. The Real Estate development will be like building 5 distinct townships involving Residential Towers, Parks, Shopping Malls, Educational Institutes, Hospitals, Commercial Spaces, Internal Roads, Water Supply, Sewage Treatment Plants, etc. everything that a town needs. Jaypee Infratech will do the town planning and construct the things where they hold expertise and sell/lease plots to other service providers where it doesn't have any experience.
Things are progressing rapidly in the townships which were located closer to Noida region. Bookings & Construction started way back in 2008-09 and buyers started getting possession of their apartments from 2012 onwards. In the last 4 financial years, Jaypee Infratech has already booked revenues to the tune of over Rs.12,000 crores from it's Real Estate division, comprising over 90% of the company Total Income during the period. The construction of the Expressway was also completed & tolling started sometime in the Q2 of FY'2012-13. Currently the Toll Collections from the Expressway contributes to just about 10-15% of the company's Quarterly Revenues and is probably not enough to even cover the Project's Interest Cost. With traffic expected to increase in the coming years, hopefully it will start paying for it's own Interest Cost possibly in the next 3-4 years. The other big advantage that this Expressway brings to the company is that it improves accessibility to the townships it is building along the expressway. Once these townships are occupied by more & more population, the usage of the Expressway will also increase substantially, leading to the project becoming profitable. Most probably it will happen 10 years down the line. Until then the Real Estate division will solely contribute to the profits of the company.
As can be seen from the T-T-M charts, Jaypee Infratech had two bad quarters during March'14 & June'14, when the company posted substantial drop in revenues Y-o-Y and almost negligible Profits. But the performance has bounced back smartly during Sept'14 quarter with healthy profits too. The slide in EPS starting from Sept'12 quarter is mainly because of the Interest Cost for the Expressway Project, which started commercial operations during that quarter. The Slide was expected and fortunately that has also halted at around Rs.2 per share mark. We can already see a slight improvement during the Sept'14 quarter and going forward we can see further improvement in EPS alongwith improvement in Total Income.
Coming to the Valuation part, the stock trades at about 11 times it's EPS at current price of around Rs.22/-. I think this is gross undervaluation of this company. In the coming quarters we will see the company's EPS grow at a slightly faster pace than the growth in it's revenues, mainly because the Interest Cost is expected to gradually come down. With the potential of Revenues from the company's Real Estate division being huge in the coming years, I think the company deserves much better valuations. I have a 12-18 months price target of at least Rs.50/- on this stock. The main problem being the promoter JP Associates' fragile financial condition. JP Associates could look at selling some of it's stake in Jaypee Infratech as and when the company's valuations improve.
Things are progressing rapidly in the townships which were located closer to Noida region. Bookings & Construction started way back in 2008-09 and buyers started getting possession of their apartments from 2012 onwards. In the last 4 financial years, Jaypee Infratech has already booked revenues to the tune of over Rs.12,000 crores from it's Real Estate division, comprising over 90% of the company Total Income during the period. The construction of the Expressway was also completed & tolling started sometime in the Q2 of FY'2012-13. Currently the Toll Collections from the Expressway contributes to just about 10-15% of the company's Quarterly Revenues and is probably not enough to even cover the Project's Interest Cost. With traffic expected to increase in the coming years, hopefully it will start paying for it's own Interest Cost possibly in the next 3-4 years. The other big advantage that this Expressway brings to the company is that it improves accessibility to the townships it is building along the expressway. Once these townships are occupied by more & more population, the usage of the Expressway will also increase substantially, leading to the project becoming profitable. Most probably it will happen 10 years down the line. Until then the Real Estate division will solely contribute to the profits of the company.
As can be seen from the T-T-M charts, Jaypee Infratech had two bad quarters during March'14 & June'14, when the company posted substantial drop in revenues Y-o-Y and almost negligible Profits. But the performance has bounced back smartly during Sept'14 quarter with healthy profits too. The slide in EPS starting from Sept'12 quarter is mainly because of the Interest Cost for the Expressway Project, which started commercial operations during that quarter. The Slide was expected and fortunately that has also halted at around Rs.2 per share mark. We can already see a slight improvement during the Sept'14 quarter and going forward we can see further improvement in EPS alongwith improvement in Total Income.
Coming to the Valuation part, the stock trades at about 11 times it's EPS at current price of around Rs.22/-. I think this is gross undervaluation of this company. In the coming quarters we will see the company's EPS grow at a slightly faster pace than the growth in it's revenues, mainly because the Interest Cost is expected to gradually come down. With the potential of Revenues from the company's Real Estate division being huge in the coming years, I think the company deserves much better valuations. I have a 12-18 months price target of at least Rs.50/- on this stock. The main problem being the promoter JP Associates' fragile financial condition. JP Associates could look at selling some of it's stake in Jaypee Infratech as and when the company's valuations improve.
