Jaypee Infratech. CMP: INR33 TP: INR45 Buy

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1 BSE SENSEX S&P CNX 2,550,318 Bloomberg JPIN IN Equity Shares (m) 1,388.9 M.Cap. (INR b) / (USD b) 51.3/ Week Range (INR) 2/1 1,, 12 Rel. Per (%) 1/9/-3 Financials & Valuation (INR m) Y/E Mar E 201E Net Sales 33,18 3,30 35,558 EBITDA 13,025 15,5 1,258 Adj PAT 2,992,05,852 EPS (INR) Gr. (%) BV/Sh(INR) RoE (%).9.. RoCE (%) P/E (x) P/BV (x) May 201 QFY1 Results Update Sector: Real Estate Jaypee Infratech CMP: INR33 TP: INR5 Buy Lowest quarterly PAT in four years: JPIN s QFY1 PAT is its lowest in four years, led by weak revenue booking (down 20% YoY to INR.b against our estimate of INR10.3b) and margin shrinkage of pp YoY (and 2.pp QoQ) to 33.5%. EBITDA declined 0% YoY (and 28% QoQ) to INR2.b against our estimate of INRb. PAT was INR132m, much below INR1b in 3QFY1, impacted also by higher tax. Revenue mix: Expressway revenue was stable QoQ at INR380m, bulk land sales revenue was INR3.5b, while POCM revenue was INR3.b (against INR5.b in 3Q). Deteriorating presales have impacted revenue and operating leverage. Operational weakness prevails: Presales were INR1.2msf (INR1.8b), further down from 0.msf (INR2.b) in 3QFY1. The Agra parcel was a key driver, with marginal contribution from Sports City (Mirzapur). FY1 presales were INR10.1b against INR32.b in FY13. Collections weak; net debt INR.5b lower: Customer collections weakened to INR.1b in QFY1 (from INR5.1b in 3Q). FY1 collections were down 0% to INR21.8b. JPIN collected ~INR10b in FY1 from INR15b of bulk land sales concluded in 1QFY1. Overall net debt declined INR.5b YoY to INRb. Cutting estimates, maintain Buy: We are cutting our EPS estimates for FY15 and FY1 by 15-20% to factor in lower margins and higher tax rate. While JPIN s market mix offers gradual value accretion potential over the longer term, the recent monetization has been inconsistent due to higher dependence on investor demand in newer land parcels. With uptick in sentiment, we believe it would witness steady improvement in demand after the recent torpidity. Our SOTPbased target price is INR5/share (partially valuing Agra and Parcel-2). The stock trades at 0.x FY1E BV and 9.x FY1E EPS. Maintain Buy. Sandipan Pal (Sandipan.Pal@MotilalOswal.com); Investors are advised to refer through disclosures made at the end of the Research Report.

2 Story in charts Market-mix keep presales momentum subdued Sales volume (msf) Sales value (INR b) Weak presales dragged revenue booking Sales value (INR b) Revenue booking (INR b) QFY12 QFY13 1QFY1 2QFY1 3QFY1 QFY1 QFY12 QFY13 1QFY1 2QFY1 3QFY1 QFY1 Collections deteriorated further (INR b) Trend in key operating factors Cum. sales Cum. collections % collection QFY12 QFY13 1QFY1 2QFY1 3QFY1 QFY FY10 QFY12 QFY13 1QFY1 2QFY1 3QFY1 QFY1 Presales mix across major land parcels (%) Noida Mirzapur Agra 100% 80% 0% 0% Yamuna Expressway toll revenue scaling up steady (INR m) % 0% FY13 1QFY1 2QFY1 2QFY1 QFY1 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-1 2 May 201 2

3 Jaypee Infratech: an investment profile Company description Jaypee Infratech (JPIN) offers a unique blend of infrastructure and real estate development through (a) Yamuna Expressway (15km, the longest access controlled six-lane BOT project connecting Agra to Greater Noida), and (b) five proposed integrated townships in surrounding land parcels, with huge development potential of ~,15 acres (~530msf). Yamuna Expressway (YE) has commenced operations in August Key investment arguments JPIN offers a unique synergistic business model of infrastructure development (Yamuna Expressway) and real estate value unlocking. Expect free cash flow (FCF) beginning FY1, given (1) expressway going ex-capex and (2) steady cash generation in real estate. FCF will be Utilizied for debt repayment and potential growth in payout. Value unlocking hinges on economic development and traffic growth in expressway and surrounding land parcels. Key investment risks However, near-term operational performance, which is largely dependent on the success of monetization in Parcel-3 and Agra, could disappoint if the real demand growth surrounding the YE gets delayed due to slow economic activities. Valuation and view While JPIN s market mix offers gradual value accretion potential over longer term, the recent monetization has been inconsistent due to higher dependence on investors demand in newer land parcels. With uptick in sentiment, we believe it to witness steady improvement once demand revives in NCR, after recently torpidity. Our SoTP-based target price stood at INR5/share (partially valuing Agra and Parcel 2). The stock trades at 0.x FY1e BV and 9.x FY1e EPS. Maintain Buy. Comparative valuations JPIN Prestige Oberoi P/E (x) FY15E FY1E P/B (x) FY15E FY1E EV/Sales (x) FY15E FY1E EV/EBITDA (x) FY15E FY1E Shareholding pattern (%) Mar-1 Dec-13 Mar-13 Promoter Domestic Inst Foreign Others EPS: MOSL forecast v/s consensus (INR) MOSL Forecast Consensus Forecast Variation (%) FY FY Target price and recommendation Current Target Upside Reco Price (INR) Price (INR) (%) Buy Stock performance (1-year) 2 May 201 3

4 Financials and valuations Income statement (INR Million) Y/E March E 201E Net Sales 32,3 33,18 3,30 35,558 Change (%) EBITDA 1, 13,025 15,5 1,258 EBITDA Margin (%) Depreciation , EBIT 1,18 12,810 1,821 1,8 Interest,5 8,90 8,900 8,583 Other Income Extraordinary items PBT 8,82,005,10,9 Tax 1,3 1,013 1,535 1,1 Tax Rate (%) Reported PAT,95 2,992,05,852 Adjusted PAT,95 2,992,05,852 Change (%) Min. Int. & Assoc. Share Adj Cons PAT,95 2,992,05,852 Balance sheet (INR Million) Y/E March E 201E Share Capital 13,890 13,889 13,889 13,889 Reserves,912,5 9,3 52,83 Net Worth 1,802 0,5 3,525,52 Debt 81,032,5 5,5 3,09 Deferred Tax 0 3,21 3,21 3,21 Total Capital Employed 12,835,921 12,901 13,52 Gross Fixed Assets 9, 102,5 103,25 103,5 Less: Acc Depreciation ,583 3,029 Net Fixed Assets 9,2 101,89 101,1 100,2 Capital WIP 3, Investments Current Assets 91,91 99,208 10,0 0,12 Inventory 5,09,258,1,092 Debtors 3,3 1,328 3,90 2,055 Cash & Bank 2,55 3,22 5,03 3,13 Loans & Adv, Others 28,5 2,901 33,229 3,25 Curr Liabs & Provns 50,913 1,82,1 9,89 Curr. Liabilities 39,32 50,23 5,29 58,52 Provisions,51,5,5,5 Net Current Assets 1,001 3,52 38,30 0,228 Total Assets 12,835,921 12,901 13,52 E: MOSL Estimates Ratios Y/E March E 201E Basic (INR) EPS Cash EPS Book Value DPS Payout (incl. Div. Tax.) Valuation(x) P/E Cash P/E Price / Book Value EV/Sales EV/EBITDA Dividend Yield (%) Profitability Ratios (%) RoE..9.. RoCE Turnover Ratios (%) Asset Turnover (x) Debtors (No. of Days) Inventory (No. of Days) Creditors (No. of Days) Leverage Ratios (%) Net Debt/Equity (x) Cash flow statement (INR Million) Y/E March E 201E OP/(Loss) before Tax 8,82,005,10,9 Depreciation , Others Interest,5 8,90 8,900 8,583 Direct Taxes Paid 1,3 1,013 1,535 1,1 (Inc)/Dec in Wkg Cap -,299,51 2-2,822 CF from Op. Activity 3,85 1,9 1,30 12,059 (Inc)/Dec in FA & CWIP -,30-2, (Pur)/Sale of Invt Others CF from Inv. Activity -,30-2, Inc/(Dec) in Net Worth -1,29-2, Inc / (Dec) in Debt 9,93-3,28-2,000-2,5 Interest Paid,5 8,90 8,900 8,583 Divd Paid (incl Tax) 1,25 1,25 1,25 1,25 CF from Fin. Activity 902-1, -12,525-12,883 Inc/(Dec) in Cash -2,82-1,999 1,315-1,32 Add: Opening Balance 5,1 2,55 3,22 5,03 Closing Balance 2,55 5 5,03 3,13 2 May 201

5 N O T E S 2 May 201 5

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