Buy HEG, target Rs 458: Emkay

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Buy HEG, target Rs 458: Emkay

Emkay has maintained a buy rating on HEG, with price target of Rs 458, in its report dated January 16, 2010.

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Emkay has maintained a buy rating on HEG , with price target of Rs 458, in its report dated January 16, 2010. The stock closed at Rs 336.05 on February 15, 2010.

"HEG holds 29% stake in Bhilwara Energy (BEL), which has 86MW hydro power plant operational under 51% subsidiary Malana Power (MPL). MPL is also under the process of implementing additional 192MW hydro power plant, which is expected to be operational by Mar-Apr '10. BEL has plans to set up additional 2,000MW hydro power plants in next 10-15 years. BEL has accepted termsheet from IFC for private placement and is also mulling for IPO to fund the equity contribution for the upcoming projects. At the CMP of Rs 336, HEG is trading at 6.2x FY11E EPS of Rs54.2 and at 5.5x FY12E EPS of Rs 61. On EV/EBITDA basis, the stock is trading at 4.5x FY11E EV/EBITDA and at 4x FY12E EV/EBITDA; while on P/B basis the stock is trading at 1.5x FY11E book value and at 1.2x FY12E book value. We are valuing HEG's core business at 7.5x FY12E EPS of Rs 61. We maintain BUY on the stock with target price of Rs 458 (Previous target Rs 325). We are not considering the value of HEG's 29% stake in BEL," says Emkay report.

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