Emkay Global Financial Services is bullish on KSK Energy Ventures and has recommended buy rating on the stock with a target of Rs 148 in its August 14, 2014 research report.
Emkay Global Financial Services research report on KSK Energy Ventures
>> Operational performance misses expectation mainly on lower than expected realizations. Adjusted loss before tax of Rs2.1bn vs expectation of Rs1.6bn loss
>> Retain our estimates; would monitor operational performance at Wardha and Mahanadi performance for one more quarter before revising our estimates
>> We have a PT of Rs148/sh, however the following needs to fall in place: signing of mining lease for Gare Pelma-III, construction and commissioning of railway line, open access resolution for Wardha, and funding for Mahanadi plant
>> Maintain Buy, as we remain positive from 1-1.5 years view and expect Mahanadi to earn reasonable RoE. However, pain in the stock might remain and it may see lower levels till
Mahandai is fully commissioned
“KSK’s adjusted PBT of Rs2.1bn was below our expectation of Rs1.6bn on poorer than expected operational performance. Average realizations at Rs3.3/unit vs expectation of Rs4.3/unit (Rs4.0/unit YoY and Rs3.9/unit QoQ) missed our estimates. Despite, lower than expected fuel cost at Rs1.9/unit vs Rs2.5/unit (Rs2.1/unit YoY and Rs2.4/unit QoQ) the results were operationally below expectation. The depreciation came in lower than expected due to change in depreciation policy, however lower other income and higher interest cost more than adjusted the benefit. The company during the quarter received liquated damages and recognized loss on sale of windmill (net Rs144mn gain pre-tax). Despite a poorer than expected performance in Q1, we retain our FY15/16 estimates, as we would monitor operational performance at Wardha and Mahanadi for one more quarter before revising our estimates. The PLF for the Wardha plant was at 11% (66% YoY, and 34% QoQ), while the same for Mahanadi plant was 54% (63% QoQ). Please note that we have factored in only first 4 units of Mahanadi plant in our numbers and, do not factor in the last 2 units and also the Morga II block.”
“We believe the pain in the stock might remain for 1-1.5 years and it may see lower levels till Mahanadi is fully commissioned. KSK remains a long-term story with numbers from Mahanadi fully getting reflected in FY17 with reasonable ROEs of ~13-15% expected in FY17. Hence, a Buy with a price target of Rs148/share,” says Emkay Global Financial Services research report.
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