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Feb 27, 2013, 11.45 AM IST | Source: Moneycontrol.com

Buy Neyveli Lignite; target Rs 89: Firstcall Research

Firstcall Research is bullish on Neyveli Lignite Corporation and has recommended buy rating on the stock with a target price of Rs 89 in its February 25, 2013 research report.

Firstcall Research is bullish on Neyveli Lignite Corporation and has recommended buy rating on the stock with a target price of Rs 89 in its February 25, 2013  research report.

"Neyveli Lignite Corporation operates three open cast Lignite mines of total capacity of 30.60 million tones and three power stations of capacity 2740 MW at Neyveil and one at Barsinagar. During the quarter ended the company’s net profit jumps to Rs.2216.50 million against Rs.1849.40 million in the corresponding quarter ending of previous year, an increase of 19.85%. Neyveli Lignite Corporation Ltd which was scheduled to be held on February 27, 2013, inter-alia, to consider declaration of Interim Dividend for the financial year 2012 -2013. Neyveli Lignite has entered into Joint Venture Agreement with Rajya Vidyut Utpadan Nigam for setting up a 1980 MW coal based thermal power project in Uttar Pradesh. Neyveli Lignite has proposed to establish 4000 MW capacity coal based power project in the State of Uttar Pradesh in 2 stages each having 2000 MW capacity. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 17% and 5% over 2011 to 2014E respectively.

The company’s net profit jumps to Rs.2216.50 million against Rs.1849.40 million in the corresponding quarter ending of previous year, an increase of 19.85%. Revenue for the quarter increase 20.05% to Rs.12557.00 million from Rs.10459.90 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.32 a share during the quarter, registering 19.85% increase over previous year period. Profit before interest, depreciation and tax is Rs.4030.30 millions as against Rs.3628.10 millions in the corresponding period of the previous year.

Outlook and Conclusion: At the current market price of Rs.78.00, the stock P/E ratio is at 11.07 x FY13E and 10.89 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.7.59 and Rs.7.71 respectively. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 17% and 5% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 6.35 x for FY13E and 5.93 x for FY14E. Price to Book Value of the stock is expected to be at 1.06 x and 0.96 x respectively for FY13E and FY14E. We recommend ‘BUY’ in this particular scrip with a target price of Rs.89.00 for Medium to Long term investment," says Firstcall Research report.

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