Reliance Power -Positives ignored; Maintain buy BUY ::Emkay

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Reliance Power

Positives ignored; Maintain buy

BUY

CMP: Rs91                                        Target Price: Rs155

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n     PAT of Rs1.97bn beat est. due to better PAF/PLF (94/91%) at Rosa (Rosa PAT Rs1.1bn vs Rs60mn yoy). Excellent operating performance - increase FY12E/13E earnings by 18%/3%

n     Building solidity - (1) huge cheap captive coal, (2) merchant capacity in captive coal plants only, (3) plants near load centers (PoC), (4) minimizing cost of capital & (5) low to reasonable tariffs - offtake and payment risk minimized 

n     Significant progress achieved. Mid-term triggers - 1) COD of 4,260MW by Dec12 (incl 1 unit of Sasan), 2) coal production in Sasan - Jun12, 3) milestones in Tilaiya & Indonesian mines & 4) gas plant and gas supplies

n     Solidity and positive triggers ignored with valuations implying LT merchant rate of Rs1.3/unit, very safe. We foresee RPL as the most sustainable private utility; Maintain Buy