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 August 21, 2012 research report.
“Reliance Power Ltd, part of Reliance-ADA group, was incorporated in 1995 as a power utility. Company owns and operates 1200MW of generation capacity with another 14.5GW of under-construction/ development stage. It came up with an IPO in 2007/8 at Rs450 per share. Reliance Infrastructures Ltd holds 38.4% shares in company.”
“Reliance Power’s 1Q13 PAT of Rs2.4bn was marginally below our estimate of Rs2.5bn due to lower plant availability (PAF) reported in the quarter on account of lower supply of domestic coal. Average PAF stood at 81% in 1Q13 against our estimate of 85% and 92% in 4Q12. Avg fuel cost at Rosa stood at Rs3.8/unit, up by 32%qoq and 36%yoy due to higher blending of spot coal (49% spot/imported coal consumed in 1Q13). We have done fine tuning of our earnings forecast in line with FY12 AR disclosures. Consequently our revised FY13E/14E EPS stands at Rs3.7/4.2 respectively vs Rs3.6/4.1 earlier.”
“Key recommendations/observation of CAG related to RPWR are – (1) allocation of Chhatrasal be reviewed, (2) Loss of Rs290bn to Govt. and (3) allocation of excess coal. However we do not find merits in above observations as – (i) Chhatrasal allocation has been reviewed and reconfirmed by EGOM in Apr 12, (ii) basis of calculation of loss is not justifiable, (iii) screening committee allocated of coal reserves to UMPPs before bidding.”
“In our view, RPWR, with its most sustainable IPP business model, is unlikely to be impacted by current sector issues – (i) fuel (captive - control on supplies/cost), (ii) merchant tariffs (no merchant capacity), (iii) SEB health (contributor to improvement with low cost power generation) and (iv) no case I bids in the sector (13,500MW PPAs). We reiterate Buy on the stock with price target of Rs155/share,” says Emkay Global Financial Services research report. FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment
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