Thursday, November 19, 2009

[Investors] Nava Bharat Q2FY10 Result Update; net profit of Rs1.2bn, Power surprise; Maintain positive bias


Nava Bharat Ventures reported net profit of Rs1.2bn (up 1% yoy), better than our estimates - due to higher merchant realizations of Rs6.15/Unit (our assumption Rs4.70/Unit). Revenues declined by 39% yoy (in line) to Rs2.5bn - attributed to co's strategy to sell more profitable power instead of Ferro alloys (86% yoy decline in revenues). Led by higher contribution from power, EBITDA margins improved by 970bps yoy. APAT stood at Rs1.25bn (MTM losses of Rs67mn on FCCB outstanding), down 7% yoy but ahead of our estimates of Rs907mn. We maintain earnings of Rs52.2/42.8/43.8 for FY10E/FY11E/FY12E. We have not factored contribution from Indonesian coal mine (10-15% potential earnings upside in FY11E). Further, more clarity (expected shortly) on Zambian coal mine cum power project is likely to be a positive trigger. At CMP of Rs390, the stock is trading at 9.1x FY11E earnings and 1.7x FY11E Book Value. This is 30-40% discount compared to peers. With (1) base case project level ROEs (27%) comparable with peers, (2) huge scope for growth & return expansion through leverage (net cash of Rs2bn), (3) earnings upside from coal mining - we remain positive on the stock.       

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The information contained and provided on this Website provides Investment advice for the education of investors. The posts are an information service only. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. We do not assume any responsibility or liability resulting from the use of such information, judgment and opinions for Trading or Investment purposes.
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