Accumulate Lanco Infratech; target of Rs 43: Prabhudas Lilladher

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Accumulate Lanco Infratech; target of Rs 43: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Lanco Infratech and has recommended accumulate rating on the stock with a target of Rs 43 in its March 21, 2011 research report.

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Accumulate Lanco Infratech; target of Rs 43: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Lanco Infratech and has recommended accumulate rating on the stock with a target of Rs 43 in its March 21, 2011 research report.

"Lanco Infratech (Lanco) has commercially added close to 1045MWs in FY11, thereby, increasing the operating capacity by 101% YoY. The company also synchronised 600MWs of Udupi-2 recently. However, commercial operation is expected to start in Q2FY12E on account of delay in transmission line set up. For other plants, Kondapalli continues to face gas supply issues from KG D6 and GAIL. The COD of Budhil Hydro (70MWs) has been delayed by six months and now expected to start in Q2FY12."

"Lanco plans to add close to 2012MWs in FY12E and has achieved significant milestones in various projects under construction. The overall funding requirement, according to the company, would be at Rs23bn for these projects in the next three years. We believe acquisition of Griffin Coal Mines would be NPV Positive. However, it will increase the D/E ratio of the parent company. On the other hand, Solar power venture looks viable only with a high control on initial costs."

"The FCF from power for the next three years is expected to be in the range of Rs50-54bn. However, we still maintain that fund raising is inevitable on account of equity for projects under development, new ventures and debt servicing. With lesser dependence on merchant power, increasing EPC opportunities and CODs of roads in FY12E, the company is not expected to give any major downside jolts. We reiterate 'Accumulate' on the stock; however, we lower our target price on the back of changes in risk premiums, delays in COD's, decreasing volumes/merchant rates and no addition in portfolio," says Prabhudas Lilladher research report.

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To read the full report click on the attachment