JP Associates may cut leverage: HSBC

HSBC has initiated coverage of JP Associates with an ‘Overweight’ rating. HSBC expects that JP Associates can successfully bring down leverage over the next two years – a big share price catalyst.

Key downside risk is reinvestment in new capacity JPA’s ambitious six-lane 165km Yamuna Expressway project is likely to start operation in April 2012, while its 5-MTPA cement plant in South India will start firing from Q1 FY13.

The company recently commissioned its 1,000MW hydro project and will commission its 500MW thermal project during Q2 FY13 and its 1,320-MW thermal project by end Q2FY14. HSBC estimates that these new projects will drive a consolidated EPS CAGR of 27% over FY12-14.