Networth expects Rel Energy Q3 net up at Rs 182cr

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Networth Stock Broking expects Reliance Energy to post revenues of Rs 11368.5 million (Rs. 1136.85 crore), up 15% YoY and net profit of Rs 1824.6 million (Rs 182.46 crore), up 10.8% YoY.

They have recommended hold rating on the stock.

Nethworth Stock Broking report on Reliance Energy

Highlights for the quarter

MERC reversed the controversial load management charge (LMC), thus sparing the consumers of Reliance Energy from penalty for high usage. Accordingly, REL is likely to adjust the amount collected under LMC.

Reliance Energy Transmission, a subsidiary of REL, bagged Rs.18bn-20bn fully-independent private power transmission lines in Maharashtra and Gujarat.

REL owned Rosa Power Company signed a PPA with UP govt. for setting up a 600MW coal-based thermal plant on the Lucknow-Delhi National Highway in Shahjahanpur district. The UPPCL will buy power at Rs.2.15/ unit.

It bagged three hydro power projects totaling 3500 MW capacity in Arunachal Pradesh. REL has offered 25% free power and 26% equity stake in the projects.

REL during the quarter exited the MoU with Orissa government for setting up 12000MW mega power plant at Hirma in Jharsuguda district following a disagreement over the inclusion of certain conditions in the deal.

Valuations

REL managed to bag few good power projects in generation and transmission segment. However, the ambitious Dadri project has still not managed to get fuel linkage, which is likely to impact the long-term growth for the company. In absence of any significant growth from power sector, REL is bidding aggressively for projects in other infrastructure segments. At current market price, the stock trades at 18.9x and 18.1 FY07E and FY08E earnings. We recommend investors to "HOLD" the stock with fair price estimate of Rs.525.