Buy Reliance Power; target of Rs 155: Emkay

Emkay Global Financial Services is bullish on Reliance Power and has recommended buy rating on the stock with a target of Rs 155 in its May 25, 2012 research report.

“Reliance Power, 4Q12 reported PAT of Rs2.31bn is in line with our estimates of Rs2.26bn. Rosa has performed broadly as expected. Gross generation was 1.1BU (including Phase-II, Phase-I at 1.03BU) for 4Q12 and 4.3BU (including Phase-II, Phase-I at 4.2bn units) for FY12. Other income (Rs1.2bn vs. our est of Rs1.8bn) was lower than expected which was offset by negative tax provision (vs. our est. of MAT taxation). PAF and PLF remained at 86.6% and 80.5% during FY12 respectively. RPWR has lost 6% PLF at Rosa-I due to forced outages and 7% due to backing down by UP.”

“We have done fine tuning of our FY13E earnings estimates to align it with FY12 actual performance and projects update. Our revised FY13E earnings stand at Rs3.4/unit against earlier estimate of Rs3.7/unit. We introduce FY14E earnings at Rs3.9/unit. We assume 1,260MW (Butibori, Sasan one unit) and 1,980MW (Sasan UMPP 3 units) of capacity addition in FY13E and FY14E respectively. Further, Rosa II is contributing from FY13E onwards. The main reason for almost flat profitability despite commissioning is due to lower other income led by cash utilizations in capex and marginal loss in Sasan UMPP in FY13E and FY14E.”

“Entire 1200MW at Rosa is fully commissioned now. Unit#1 at Butibori will commission in Jun’12 while the boiler hydro test is completed for Sasan’s unit#1. Coal production from Sasan mines is also expected to start in 2Q13 with gradual ramp-up as per Sasan power plant commissioning. Stock has corrected 22% in last three months despite recent positive events like EGoM’s final approval for excess coal from Sasan and FSA for Rosa. It is currently trading at 1.3x FY13E book. In our view, various positive triggers are being ignored at current market price as stock is trading at more than 40% discount to its risk adjusted fair value. We foresee RPWR as most sustainable private power utility. We reiterate buy with the price target of Rs155,” says Emkay Global Financial Services research report.   

Non-Institutions holding more than 90% in Indian cos

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