Buy Jaiprakash: Motilal

Motilal Oswal has maintained its Buy rating on Jaiprakash Associates with a price target of Rs 305.

A report said: "Jaiprakash Associates has announced financial closure for the Taj Expressway project The company has raised Rs32b from ICICI Bank-led consortium (including Rs12bn earlier announced), comprising debt of Rs29.5b and equity of Rs2.5b (for 1% stake in the project).

"The total cost for the expressway construction is Rs60b, which was earlier proposed to be financed by equity of Rs20b, debt of Rs20b and real estate (RE) monetization of Rs20b. JAL has already invested Rs10b as an equity contribution towards the project, while Rs2.5b has been raised through sale of 1% stake to ICICI Bank. Total debt for the project now stands at Rs29.5b (vs estimate of Rs20b). Post the recent fund raising, the company has already raised Rs42.5b for TE development. The balance Rs18.5b would be through real estate monetization over the next 2-2.5 years. For Phase 1 RE development at NOIDA, booking has already been received for 4.1msf (vs 2.6 msf in March 2008), and company has received customer advances of Rs4.0-4.5b.

"Significant progress on land acquisition: The company has also received land for expressway construction upto 80-100kms and lease agreement for entire 166kms is executed in favour of the company. Targeted expressway completion is October 2010. The press release states that all requisite sanctions and approvals including the environment clearance for the project are in place. Currently, construction work is in progress at ~70 km of the expressway. JAL has placed orders for all major equipment including slipform pavers and deliveries have commenced at site.

"TE land acquisition for RE development: Total land under possession has increased to 1,080 acres (vs 914 acres as of March 2008), 2) Average cost of land acquisition stood at Rs1.9m per acre, 3) Total land for the project is likely by September 2009 (6,250 acres).

"We expect Jaiprakash to report net profit of Rs8b in FY09 (up 30% YoY) and Rs10.9b in FY10 (up 37.5% YoY). Based on SOTP methodology, we arrive at a price target of Rs305/sh, comprising of core business at Rs138/sh, investment in hydro and thermal power project at Rs44/sh, Taj Expressway at Rs145/sh and Jaypee Greens at Rs17/sh. At the CMP of Rs139, Jaiprakash trades at a PER of 23x FY09 and 17x FY10. Maintain Buy."