Expect 60% upside in NHPC: Aashish Tater

See 60 percent upside in NHPC, says Aashish Tater, Head of Research, Fortunewizard.com. 

Tater told CNBC-TV18, "NHPC is one stock where we feel the market has written this particular story. But if someone analysis what has happened bad for the last five years, now with the reforms we feel the company would again be a very attractive bet at current levels from long-term perspective."
He further added, "Now we recently had coverage on this particular stock because we felt new plants would come in and the plant load factor would also stabilize around at 90 percent levels from current 85 percent."
"Now there were two projects that were having lot of hurdles because of the environmental clearance but we had studies the entire geography right from north to south and we feel that apart from the coal power generation company, government has to be lenient in giving clearances to companies like NHPC and SJVN."
"If you go to south to Coimbatore, Tamil Nadu, Hyderabad, the industry is not working three out of seven days at least on an average because of power cuts. Towards Jammu again similar issues, same goes with West Bengal aspect. So if you combine all these aspects we feel with the environmental clearance that the management has also guided, the EPS increment would be at least 50-60 percent from current levels."
"The company would stabilize around Rs 4 EPS and given it’s a PSU company government would be looking for higher dividends from the management. We feel Rs 2 dividend cannot be ruled out on this particular stock. So take a two years perspective and see if you get a Rs 2 dividend on Rs 25 stock and the dividend yield roughly works out to be at 5 percent. The stock can easily go and test Rs 42 mark that we are pegging from next 18 months perspective."
"But another thing that we are looking at is if you see the worst has almost factored in, in this particular price because the Parbati-II project and the other project where the company was facing hurdle, has been written off from analyst radar for valuing the company. And now with project clearances coming in FY13 probably in the later stages, these kind of assets will again come into analyst radar and that sensitivity analysis that we are pegging at Rs 4 plus EPS there could be a huge re-rating on the stock because on an average the price to book value these kind of companies enjoy is roughly around 1.6 times. The stock is right now trading at one time price to book, so almost 60 percent upside from next 12-15 months perspective. This is definitely a portfolio bet given there is hardly any downside on this particular stock and almost 60 percent upside." Disclosure: Safe to assume the stock discussed have been recommended to clients.