India’s biggest builder of dams Jaiprakash Associates Ltd reported a net profit of Rs315 crore before exceptional items, much higher than the Street consensus of about Rs200 crore.
Yet, the stock was flat in Monday’s trading session. According to an analyst with a foreign broker, a large part of the unexpected performance is explained by a one-time refund related to an engineering and construction project.
Revenue of its construction division rose by 79% to Rs1,643 crore quarter-on-quarter, and the segment’s profit jumped by 124% to Rs411 crore. While the performance of this segment has been volatile in the past, the large jump in the December quarter has taken most analysts by surprise. Having said that, the secular trend in this segment seems to be of strong growth. In the first three quarters of this fiscal, revenue of the segment have nearly doubled to Rs3,615 crore.
There was another large surprise in the revenue and profit of the real estate division. In the June and September quarters, this division had reported revenue of Rs95 crore and Rs88 crore, respectively. Last quarter, its revenue jumped to Rs345.6 crore. The segment’s profit jumped from Rs29.2 crore in the September quarter to Rs147 crore in the three months ended 31 December. According to an analyst, the unusual spike could be the result of revenue being recognized as a result of certain thresholds being reached.
Also See Roller Coaster (Graphics)
While revenue and profit of these two divisions were higher than estimates, those of the other major segment—cement—were lower. Average realizations of the cement division fell by 15%. The company sells a majority of its cement in Uttar Pradesh, where the drop in cement prices has been among the most severe in the country. With the company commissioning new cement plants, its capacity next year will be much higher. With price realizations being lower than expected, earnings estimates for the cement division may need to be altered.
But the construction and realty sectors have done better than expected and so, overall estimates may not change materially. This is what the share price movement on Monday suggests. Jaiprakash’s shares have been flat since August, after having risen by four times since its lows in March.
Investors have still to recover a large part of the losses incurred after the fall since early 2008, with the stock trading at almost half its peak level then.
Graphics by Yogesh Kumar / Mint