Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Orient Green Power (ORIN.BO)
Buy Equity Research
Twin drivers of stock performance to the fore; reiterate Buy
What's changed
Orient Green (OGPL) stock is down 53% since listing (Oct 18, 2010), under
performing BSE Small cap index and BSE Power index by 13%/14% YTD.
We believe: 1) lack of visibility on execution of wind & biomass projects;
and 2) doubts on OGPL’s ability to derive benefits under renewable energy
certificate (REC) mechanism are key reasons for the under performance.
Implications
While the current stock price implies no value for: 1) REC benefits; 2)
Biomass business; and 3) 110MW project in Sri Lanka, we believe the
following twin drivers of performance will come to the fore:
1) Execution: OGPL is likely to commission about 100MW of wind over
May/June (just before commencement of wind season in May) and 30MW
of biomass in 1QFY12E. Our visit to 24MW wind farm and 10MW biomass
plant in Tamil Nadu shows that machines are already erected and waiting
for final stage clearances to start commercial operations.
2) Emerging visibility on demand for REC’s: The trading of REC’s has
commenced and for March 2011 the REC’s traded at a cap price of
Rs3.9/kwh (average Rs2.5/kwh for Feb-April 2011). The momentum in REC
trading (despite deteriorating finances of discoms), gives us confidence
that stock will start reflecting the REC benefits on commissioning of new
wind capacities that are likely to be eligible under REC mechanism.
Valuation
We reiterate our Buy rating on OGPL with 12m SOTP based TP of Rs48 implying
upside of 118%. OGPL is trading at 0.8x FY11 P/B, implying wind projects to
have equity IRR of 10%. Our scenario analysis, assuming no REC’s and valuing
800MW, indicates value 46% above current share price, implying IRR of 15%.
Key risks
1) Weak 4Q numbers due to delays in biomass capacities; 2) TN regulator
ruling new capacities are ineligible under REC mechanism.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Cautious
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Orient Green Power (ORIN.BO)
Buy Equity Research
Twin drivers of stock performance to the fore; reiterate Buy
What's changed
Orient Green (OGPL) stock is down 53% since listing (Oct 18, 2010), under
performing BSE Small cap index and BSE Power index by 13%/14% YTD.
We believe: 1) lack of visibility on execution of wind & biomass projects;
and 2) doubts on OGPL’s ability to derive benefits under renewable energy
certificate (REC) mechanism are key reasons for the under performance.
Implications
While the current stock price implies no value for: 1) REC benefits; 2)
Biomass business; and 3) 110MW project in Sri Lanka, we believe the
following twin drivers of performance will come to the fore:
1) Execution: OGPL is likely to commission about 100MW of wind over
May/June (just before commencement of wind season in May) and 30MW
of biomass in 1QFY12E. Our visit to 24MW wind farm and 10MW biomass
plant in Tamil Nadu shows that machines are already erected and waiting
for final stage clearances to start commercial operations.
2) Emerging visibility on demand for REC’s: The trading of REC’s has
commenced and for March 2011 the REC’s traded at a cap price of
Rs3.9/kwh (average Rs2.5/kwh for Feb-April 2011). The momentum in REC
trading (despite deteriorating finances of discoms), gives us confidence
that stock will start reflecting the REC benefits on commissioning of new
wind capacities that are likely to be eligible under REC mechanism.
Valuation
We reiterate our Buy rating on OGPL with 12m SOTP based TP of Rs48 implying
upside of 118%. OGPL is trading at 0.8x FY11 P/B, implying wind projects to
have equity IRR of 10%. Our scenario analysis, assuming no REC’s and valuing
800MW, indicates value 46% above current share price, implying IRR of 15%.
Key risks
1) Weak 4Q numbers due to delays in biomass capacities; 2) TN regulator
ruling new capacities are ineligible under REC mechanism.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Cautious
No comments:
Post a Comment