Expect 40-50% return in SJVN: Tater

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Expect 40-50% return in SJVN: Tater

Investors can expect 40-50% return in SJVN in for two - two and half years time, says Ashish Tater, Fort Share Broking.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Tater See what other Experts & Brokerages are saying about SJVN See messages about SJVN SJVN BSE | NSE 30/05/12 Are Mutual Funds betting on SJVN?

Investors can expect 40-50% return in SJVN in for two - two and half years time, says Ashish Tater, Fort Share Broking.

Tater told CNBC-TV18, "SJVN is one stock which is very defensive for investors who are looking for portfolio bets. If I take a call in terms of valuations right now the company is having 1,500 megawatt project which is on stream and is expected to add another 400 megawatt in Rampur area, which is expected to commence in the first quarter of 2013 or latest by second quarter. Its current market cap is around Rs 9,000 crore. By any valuation matter, hydro power company deserves a valuation of 7.5 crore per megawatt. It is right now trading at 6 crore megawatt."

He further added, "Looking at their other MoUs for the company. The company is also having understanding with Nepal and Bhutan where they are having on stream projects of 900 megawatt and two projects which are combined at 1400 megawatt for Bhutan. So there are a lot of things that are going to shape out in the days to come."

"The company has been very liberal in terms of paying dividend. Last year they paid 60 paise which works out to be 3% dividend yield. This year they have announced 80 paise dividend which is 4%. With this same projection we feel that in the next 2-2.5 years the company would be paying out close to Rs 1.5 of dividend."

"A PSU stock giving you 5% dividend yield or 6% dividend yield, I do not think the stock would languish at Rs 20 or Rs 22 odd mark. But even if I assume the same 3.5% dividend yield the stock could be languishing somewhere around Rs 40 to Rs 44 plus you have this under value strategy with 400 megawatt actually adding on into the current market cap."

"I assume that Rs 2,400 crore is added in the next two years, even if there is no valuation expansion, investors can make 40 to 50% return if they invest for two - two and half years perspective. It is a defensive bet but it is for people who would like to take safe bets into a space."