Friday, February 27, 2015

Jaypee Infratech Ltd: Buy
CMP: Rs.20.15
Jaypee Infratech (JPIN) was incorporated on 5 April 2007 as a Special Purpose Vehicle (SPV) for implementation, operation, and maintenance of 165 kilometer long 6-lane Access-Controlled Yamuna Expressway in the state of Uttar Pradesh connecting Noida and Agra. The company is undertaking the ribbon development on 6175 acres at five locations along the expressway for commercial, industrial, institutional, residential and recreational purposes. JPIN is a subsidiary of the Jaypee Group, a diversified infrastructure conglomerate in India with interests in Engineering & Construction, Power, Cement, Real Estate, Hospitality, Expressways, Sports & Education (not-for-profit).

Triggers
(i) Jaypee Infratech Ltd, offers a unique synergistic business model of infrastructure development (Yamuna Expressway) and real estate value unlocking. Yamuna Expressway of length 165 km is the longest access-controlled six-lane BOT project connecting Agra to Greater Noida. Yamuna Expressway and surrounding land parcels offer value unlocking story with strong synergistic bearings.
(ii) Traffic growth at expressway should be good in the coming years. Expressway commenced operations in August 2012. Moreover, with Capex for Yamuna Expressway (YE) already over, JPIN is set to generate steady free cash flows (FCF) in the near future. 
(iii) Jaypee Infrateh Ltd (JPIN) offers an excellent play on sustainable value unlocking from huge real estate potential. In other words, JPIN offers a play on gradual value unlocking from long-term land assets.  JPIN is the cash cow of the JP Group. 
(iv) The UP government has now authorized Yamuna Expressway Industrial development Authority to sanction the annual increment in toll rates from April 1 every year. The expressway has three toll plazas located at Jewar (38 km), Mathura (94 km) and Agra (150 km). 
(iv) The Book value for JPIN stands at Rs.43.59. At the CMP of Rs.20.15, the stock is trading at significant discount to its book value. The P/E of the shares of the company is 10.31 against the industry average of 29.26. Hence, I maintain "BUY" on the scrip with immediate targets of Rs.25-31.
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