Jefferies has initiated coverage with a buy rating on Indian Energy Exchange and set a price target at Rs 1,950, implying a 25 percent potential upside from Monday's closing price. The stock gained 2.6 percent intraday Tuesday.
In bull case scenario, the price target is set at Rs 2,247 per share, which is 44 percent higher over Monday's closing price.
The research house said IEX has a headstart in the power exchange market and will gain market share from less transparent bilateral traders.
It feels the transparency will drive rise in exchange volume share. Medium term power oversupply provides an additional safety net to the exchange, it said.
Jefferies expects volumes and net profit to grow at compounded rate of 14 percent by March 2020.
Pricing is a concern area, but within CERC trader limits, it said.
The research house further said high dividend payout ratio is a key positive for the company that will keep return on equities more than 40 percent going ahead.
IEX is the first and largest power exchange in India, providing an automated trading platform for physical delivery of electricity.
At 12:24 hours IST, the stock was trading at Rs 1,574, up 1.17 percent on the NSE.
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