Buy Nava Bharat Ventures; target of Rs 410: Asit C. Mehta

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Buy Nava Bharat Ventures; target of Rs 410: Asit C. Mehta

Asit C. Mehta is bullish on Nava Bharat Ventures and has recommended buy rating on the stock with a target of Rs 410 in its November 3, 2010 research report.

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Asit C. Mehta is bullish on Nava Bharat Ventures and has recommended buy rating on the stock with a target of Rs 410 in its November 3, 2010 research report.

"Nava Bharat Ventures Ltd. reported 1% decline (QoQ) in revenues and 20% decline in net profit (QoQ). Company profitability was hit by lower merchant power realization, which continued its declining trend. We have lowered our valuation for the power segment from Rs 302 to Rs 279 as we expect merchant power rates to stabilize around 3.5-3.75 per kwh as compared to our earlier estimates of INR3.75-4 per kwh by FY15. We reiterate, "Buy" rating on the stock with a price target of Rs 410 based on SOTP valuation."

"We expect merchant power rates to stabilize around current levels of Rs 4 per kwh for rest of the year and finally settle around Rs 3.5-3.75 by FY15. Despite declining trend, merchant power rates still remain attractive as cost of generation is far below current realizations. Ferro alloys segment (especially Ferro chrome) continue to suffer from lack of demand and realizations are not enough to switch power from merchant sales to Ferro alloys production. Therefore we don't expect any significant recovery in ferro alloys. We expect sugar segment with its integrated model to perform much better in the second half, as international prices have moved up sharply in last two months. We reiterate, "Buy" rating on the stock but revised our target downwards to Rs 410 based on SOTP valuation," says Asit C. Mehta research report.

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