Why JPASSOCIATE is underperfomer

JAIPRAKASH ASSOCIATES LTD at Rs 71.70 as on 15 Feb 2013

is trading down 16.5% / 25.5% over year / month respectively

the reason for underperformance is quite obvious

1 It was able to maintain the growth of meagre 4.2 % in the income

2 It is not able to curtail the  expenditure which has increased marginally by 6.9 %

3 This lead the OPM to fall from 28.87 percent to 26.48 percent

4  It is burdened due to 18.1 percent increase in cost of financing debt

5  This has lead to net profit falling over 35.5 percent

the published results available at www.bseindia.com was analysed as follows

the strength of jaiprakash associates, however lies in
1) the facts that jpassociate owns  67.93 %  of Jaiprakash Power Ventures which is currently
worth Rs. 5500 crore and 83.16 %  of Jaypee Infratech which is currently worth Rs. 5200 crore
however 72.6%  /67.39 %  of such shares are pledged with various borrower
2) as such out of market capitalisation  Rs. 15470 crore an amount of Rs. 10700 crore is
represented by market value of listed subsidiries leaving a value of Rs. 4770 crore for standalone
3) though the company was not able to offload its stake in Jaypee Infratech through OFS
recentlyit may do it so in coming months when the market sentiment improves.
4) the company could bring down the borrowing of around 600 crore and hence of cost of
servicing debt around 66 crore if it utilise the money from offloading of  stake sale
 in Jaypee Infratech (as and when it happens)
5) picking up of activity in infrastructure space and lowering of interest (as and when it happens) will enable the company to get better market valuation.

TILL SUCH TIME THE LONG TERM PERSPECTIVE OF COMPANY MAY REMAIN BLEAK

on technical side Williams %R indicator at around 75 indicated that the scrip seems to be oversold with and likelness of MACD in negative 5 to 6 territory  which seems the stock shall correct positively garnering a return outlook of around 8-10% during 18 to 28 Feb 2013 as detailed below

Conclusion 

This coverage is made to anlayse the reason for underperformance and

conditions on happening of which the stock may move up from the current level.

The stock which is on  long term downtrend at current situation

however on short term basis the stock looks promising with a return of 8-10%