Neyveli Lignite a mkt performer; tgt of Rs 195: Karvy

“Neyveli Lignite Corporation (NLC) reported Q3FY09 result in line with our estimates, except for the adjustment to previous period sales worth Rs 3887.3 mn. Net sales for Q3FY10 excluding prior period adjustment stands at Rs 8630 mn, 6% higher than our estimates. This is a growth of 30% (YoY) but 2% decline sequentially. YoY 30% growth in sales would be attributed to improvement in tariff rate; volume growth contributes only 10%. Sequentially net sales declined on account of lower power generation as heavy rain had disturbed operation during November. Though volume declined by 13% (QoQ), higher lignite sales have compensated most of the decline to report a net sales (without prior period sales) decline of 2% only.”

“The stock is currently trading at 2.5x its FY10 BV and 2.3.x FY11 BV. We retain our price target of Rs 195/share based on 3x its FY11 BV. However, due to recent fall in the stock price, we upgrade our rating from Market performer to BUY,” says Karvy Stock Broking.

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