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JP Power (XJSHF, Buy)
Bear Case: What can go wrong
In the bear case, equity funding for its new power projects may get tough so
we remove all future projects starting after FY15E that are not ordered yet -
Bina-II (1x660MW), Bara-II (2x660MW), Lower Siang (5x300MW) and Hirong
(2x250MW) power projects of 3.98GW capacity from our valuation.
We assumed a 10% cut in merchant tariff for merchant sale of Karcham,
Bina-I and Bara-I projects. Further, assumed Bina-I to source 35% of its
FY13-15E coal requirement at higher price through e-auction / market on
lack supply from CIL.
We assumed 50bps higher interest rate.
Consequently, we expect EPS cut of 35% in FY13E and 31% in FY14E
leading to a 50% EPS CAGR over FY11-14E
Further, raised holdco discount to 30% subsidiaries value and valued
treasury stock at 30% discount to SOTP value.
Base Case: FY13 80% Hydro – an anti-coal play
In the Base case, we assumed delay in capex by 2 years at 1x600MW Bina-
II and and 1 year at 2x660MW Bara-II, to protect its leverage.
Assumed Bina-I to source 35% of its FY13-14E coal requirement at higher
price through e-auction / market on lack supply from CIL
Further, assumed a 25bps higher interest cost.
We assumed 15% holdco discount to subsidiaries value and valued treasury
stock at 20% discount to SOTP value.
To factor in above, we cut our PO to Rs55 (Rs65).
Risk-Reward: Favorable
In the Bear case, we expect the stock could trade at Rs34/share based on
DCF based SOTP value translating into 1.6x FY13E P/BV.
In the base case, we expect the stock could trade at Rs55/share based on
DCF based SOTP value translating into 2.54x FY13E P/BV.
Overall, the risk-reward appears favorable given 80% of its capacity is Hydro
in FY13E, which doesn’t have shortage challenge.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JP Power (XJSHF, Buy)
Bear Case: What can go wrong
In the bear case, equity funding for its new power projects may get tough so
we remove all future projects starting after FY15E that are not ordered yet -
Bina-II (1x660MW), Bara-II (2x660MW), Lower Siang (5x300MW) and Hirong
(2x250MW) power projects of 3.98GW capacity from our valuation.
We assumed a 10% cut in merchant tariff for merchant sale of Karcham,
Bina-I and Bara-I projects. Further, assumed Bina-I to source 35% of its
FY13-15E coal requirement at higher price through e-auction / market on
lack supply from CIL.
We assumed 50bps higher interest rate.
Consequently, we expect EPS cut of 35% in FY13E and 31% in FY14E
leading to a 50% EPS CAGR over FY11-14E
Further, raised holdco discount to 30% subsidiaries value and valued
treasury stock at 30% discount to SOTP value.
Base Case: FY13 80% Hydro – an anti-coal play
In the Base case, we assumed delay in capex by 2 years at 1x600MW Bina-
II and and 1 year at 2x660MW Bara-II, to protect its leverage.
Assumed Bina-I to source 35% of its FY13-14E coal requirement at higher
price through e-auction / market on lack supply from CIL
Further, assumed a 25bps higher interest cost.
We assumed 15% holdco discount to subsidiaries value and valued treasury
stock at 20% discount to SOTP value.
To factor in above, we cut our PO to Rs55 (Rs65).
Risk-Reward: Favorable
In the Bear case, we expect the stock could trade at Rs34/share based on
DCF based SOTP value translating into 1.6x FY13E P/BV.
In the base case, we expect the stock could trade at Rs55/share based on
DCF based SOTP value translating into 2.54x FY13E P/BV.
Overall, the risk-reward appears favorable given 80% of its capacity is Hydro
in FY13E, which doesn’t have shortage challenge.
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