JPA (Jaiprakash Associates) stock is up 50% in 2012 so far because of high beta. An expected cut in interest rate will improve JPA’s earnings, as 85% of Ebitda goes in meeting interest cost.
However, analysts assess JPA’s balance sheet will remain overleveraged with debt / equity of 4.2 times, as the company needs to fund large cash flow shortfalls.
The positives, such as secured coal supply for the power plant and possible commencement of the Yamuna Expressway from April are priced in. Sell.
Review by Kim Eng Research
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