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Jaiprakash Power Ventures Ltd
HOLD Target Price: Rs. 77.00
CMP: Rs.64.30 Market Cap.: Rs.31571.30mn. Date: 05th February, 2010
Key Ratios:
Particulars FY09 FY10E FY11E
OPM(%) 92.63 89.71 90.00
NPM(%) 47.15 38.78 40.61
ROE(%) 13.94 13.69 14.15
ROCE(%) 13.63 16.05 16.69
P/BV(x) 2.94 2.53 2.18
P/E(x) 22.10 18.52 15.38
EV/EBDITA(x) 10.72 8.01 6.94
Debt equity
Ratio
0.69 0.64 0.60
Key Data:
Sector Power
Face Value Rs.10.00
52 wk. High/Low
(Rs.)
103.70/24.35
Volume (2 wk. 806000
SYNOPSIS
• Jaiprakash Power Ventures Ltd with
Jaiprakash Hydro-Power Ltd, renamed as
Jaiprakash Power Ventures Ltd is one of the India’s largest Hydro-Power plant in the
Private Sector.
• Jaiprakash Power Ventures Ltd has reported that the FCCB issue of US$ 200 million has
been launched and priced (with an upsize
option of upto US$ 100 million).
• The company is implementing the 1320 MW
(2X660 MW) super critical technology boiler
pit head based Nigrie Thermal Project at
District Singrauli in the state of Madhya Pradesh which is expected to commence
operations in 2013.
• Jaiprakash Hydro Power (JHPL) is a part of
Jaypee group that has a turnover of $650 million. JHPL is subsidiary of Jaiprakash
Associates (JAL).
• The top line of the company is expected to
grow at a CAGR of 19% over 2008A to
2011E.
Share Holding Pattern:
V.S.R. Sastry
Vice President
Equity Research Desk
91-22-25276077
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
2
Table of Content
Investment Highlights....................................................................................................3
Peer Group Comparison...............................................................................................5
Financials Results...........................................................................................................6
Charts .............................................................................................................................8
Outlook and Conclusion.............................................................................................12
Industry Overview .......................................................................................................12
3
Investment Highlights
• Q3 FY10 Results Update
Jaiprakash Power Ventures Ltd disclosed results for the quarter ended
December 2009. Net sales for the quarter moved up 92% to Rs.1190.30
million as compared to Rs. 618.70 million during the corresponding quarter
last year. During the quarter, PAT stood at Rs.237.00 million from Rs.236.40
million in previous same quarter. The Basic EPS of the company stood at
Rs.0.34 for the quarter ended December 2009.
• Amalgamation of JPVL with JHPL
Jaiprakash Power Ventures Ltd has informed that the Pursuant to the
successful amalgamation of erstwhile Jaiprakash Power Ventures Ltd with
Jaiprakash Hydro-Power Ltd, renamed as Jaiprakash Power Ventures Ltd
(the Company), the Board of Directors of the Company has been
reconstituted. Necessary formalities of change of name of the Company
to Jaiprakash Power Ventures Ltd., in terms of the Scheme, are being
carried out with the Registrar of Companies, Punjab, and Himachal
Pradesh & Chandigarh.
• Implementing of hydroelectric project
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Jaypee Karcham Hydro Corporation Limited (JKHCL),a subsidiary of
Jaiprakash Associates Limited (JAL), implementing the 1000 MW (4*250 MW
units) run-of-the-river Karcham Wangtoo hydroelectric project on river
Sutlej, in Kinnaur district of the state of Himachal Pradesh and expected to
commence operations in 2011.
• Set up of Thermal Project
Jaypee Nigrie Super Thermal Power Project comprising 2 x 660 MW Super-
critical Unit will be set up by JPVL at a site in Nigrie - Village, Tehsil - Deosar,
District - Singrauli in Madhya Pradesh. The expected date of commissioning
for Unit - I and Unit - II are end April 2013 and end October 2013
respectively.
The Nigrie Thermal Project is expected to utilize coal from two captive coal
blocks, the Amelia (North) and Dongri Tal – II coal block with total coal
reserves of 250 MT of coal. These coal blocks contain sufficient coal
reserves to fuel the Nigrie Thermal project over the long term. JAL is
expected to develop and mine this coal in a joint venture with MPSMCL.
The joint venture has been allotted these two coal blocks solely for the
purpose of supplying fuel to the Nigrie Thermal Project.
The main features of the Project are:
Super critical boiler technology will achieve an unprecedented net
efficiency level for brown coal power stations. This technology’s higher
steam temperatures and pressure parameters offer the most economical
way to improve plant efficiency and operating flexibility – as well as
achieve fuel cost savings and lower emissions for each KWH of electricity.
• Improved thermal efficiency
• Lower emissions levels
• Lower operating costs
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• Greater operating flexibility
• Reduced fuel consumption
• Reduced fuel cost
• Reduced ash generation
• Reduction of carbon dioxide emission due to less consumption of fuel
• Very good part load efficiency as compared to sub-critical unit
• Reduced NOx,Sox and SPM emission
• Acquisition of BPSCL
JPVL has acquired Bina Power Supply Company Limited (BPSCL) from the
Aditya Birla Group. BPSCL was set up by the Aditya Birla Group to set up a
1250 MW (two phase of 625 MW each) coal fired Thermal Power Plant at
Bina in the State of Madhya Pradesh. The project is expected to be
commissioned by 2012 (phase -1).
• Acquisition of Sangam Power Generation Company
The company has acquired Sangam Power Generation Company Ltd. for
setting up super critical technology boiler based 3 x 660 MW Karchana
Thermal Power Project (Phase – I : 2x660 MW) and Prayagraj Power
Generation Company Ltd. for 5 x 660 MW Bara Thermal Power project
(Phase – I : 3x660 MW) from UP Power Corporation Ltd. on BOO basis. Both
the projects are expected to be commissioned by 2014.
Peer Group Comparison
CMP Market
Cap.
EPS Name of the
company
(Rs.) (Rs. Mn.) (Rs.)
P/E (x) P/BV
(x)
Dividend(%)
JaiprakashPower 64.30 31571.30 2.91 22.10 2.94 15.00
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Ventures Ltd
NTPC 204.25 168454.84 10.70 19.09 2.86 36.00
Power Grid
Corporation of
India 107.30 45202.95 5.01 21.44 3.34 12.00
Tata Power 1287.00 30478.74 47.85 26.85 3.52 115.00
Key Concerns
• The Company’s Power Station is located in mountainous region and is thus
prone to floods, rock fall etc.
• The Company has fairly stable generation and has been receiving regular
payments in respect of sale of energy and is discharging its debt
obligations quite regularly.
• Increase in working capital costs.
• Power sector faces challenges such as difficulties in debt collection,
procedural delays and need for improved coordination between various governmental agencies.
• Pace of opening up distribution sector to private sector is slow.
Financials Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in million) FY08A FY09A FY10E FY11E
Description 12m 12m 12m 12m
Net Sales 3008.20 3179.10 4395.61 5054.95
Other Income 416.70 0.00 0.00 0.00
Total Income 3424.90 3179.10 4395.61 5054.95
Expenditure 355.20 -234.20 -502.38 -505.50
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Operating Profit 3780.10 2944.90 3943.42 4549.46
Interest -992.80 -819.40 -1496.76 -1556.63
Gross Profit 2787.30 2125.50 2661.14 2992.83
Depreciation -458.80 -469.70 -659.74 -686.13
Profit before Tax 2328.50 1655.80 2026.22 2306.7
Tax -194.60 -157.00 -331.02 -253.74
Profit after Tax 2133.90 1498.80 1704.81 2052.96
Extraordinary Items 0.00 -70.30 0.00 0.00
Net Profit 2133.90 1428.50 1704.81 2052.96
Equity Capital 4910.00 4910.00 4910.00 4910.00
Reserves 5394.60 5841.50 7546.31 9599.27
Face Value(Rs) 10.00 10.00 10.00 10.00
EPS 4.35 2.91 3.47 4.18
Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in million) 30-Jun-09 30-Sep-09 31-Dec-09 31-Mar-10
Description 3m 3m 3m 3m(E)
Net Sales 825.90 1141.50 1190.3 1237.91
Other Income 0.00 0.00 0.00 0.00
Total Income 825.90 1141.50 1190.30 1237.91
Expenditure -73.60 -80.60 -174.20 -123.79
Operating Profit 752.30 1060.90 1016.10 1114.12
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Interest -189.20 -184.80 -504.60 -403.68
Gross Profit 563.10 876.10 511.50 710.44
Depreciation -122.90 -124.30 -240.00 -147.72
Profit before Tax 440.20 751.80 271.50 562.72
Tax -74.80 -127.70 -34.50 -84.41
Profit after Tax 365.40 624.10 237.00 478.31
Exordinary Items 0.00 0.00 -68.40 0.00
Net Profit 365.40 624.10 168.60 478.31
Equity Capital 4910.00 4910.00 4910.00 4910.00
Face Value 10.00 10.00 10.00 10.00
EPS 0.74 1.27 0.34 0.97
Charts
9
10
11
1 Year Comparative Graph
Jaiprakash Power
Ventures Ltd BSE SENSEX
12
Outlook and Conclusion
• At the current market price of Rs.64.30, the stock is trading at 18.52 x and
15.38 x for FY10E and FY11E respectively.
• Price to Book Value of the stock is expected to be at 2.53 x and 2.18 x
respectively for FY10E and FY11E.
• Earning per share (EPS) of the company for the earnings for FY10E and
FY11E is seen at Rs.3.47 and Rs.4.18 respectively.
• On the basis of EV/EBITDA, the stock trades at 8.01 x for FY10E and 6.94 x
for FY11E.
• The top line of the company is expected to grow at a CAGR of 19% over
2008A to 2011E.
• The FCCB issue of US$ 200 million of Jaiprakash Power Ventures Ltd has
been launched and priced (with an upsize option of upto US$ 100 million).
• The company is implementing the 1320 MW (2X660 MW) super critical
technology boiler pit head based Nigrie Thermal Project at District
Singrauli in the state of Madhya Pradesh which is expected to commence
operations in 2013.
• Jaypee Karcham Hydro Corporation Limited (JKHCL),a subsidiary of
Jaiprakash Associates Limited (JAL), implementing the 1000 MW (4*250
MW units) run-of-the-river Karcham Wangtoo hydroelectric project on river
Sutlej, in Kinnaur district of the state of Himachal Pradesh, expected to
commence operations in 2011.
• We recommend to ‘HOLD’ this stock at Target Price of Rs.77.00.
Industry Overview Sector structure
13
As the Indian economy continues to surge ahead, its power sector has been
expanding concurrently to support the growth rate. The demand for power is
growing exponentially and the scope of growth of this sector is immense. India's
total installed capacity of electricity generation has expanded from 105,045.96
MW at the end of 2001–02 to 150,323.41 MW at the end of June 2009. In fact,
India ranks sixth globally in terms of total electricity generation.
Source-wise, thermal power plants account for an overwhelming 63.9 per cent
of the total installed capacity, producing 96,044.24 MW. Hydel power plants
come next with an installed capacity of 36,916.76 MW, accounting for 24.6 per
cent of the total installed electricity generation capacity.
Besides thermal and hydel power, renewable energy sources contribute 8.8 per
cent to the total power generation in the country producing 13,242.41 MW.
Nuclear energy makes up the balance 2.7 per cent contributing 4,120 MW.
Growth Potential
India's energy sector will require an investment of around US$ 120 billion-US$ 150
billion over the next five years. The government has revised its target of power
capacity addition to 90,000 MW in the 11th Five-Year-Plan (2007-12), up by
11,423 MW from the earlier estimate of 78,577 MW to sustain the growth
momentum of the economy.
Further, according to the Planning Commission estimates, renewable energy
(RE) projects worth US$ 16.50 billion, for the generation of 15,000 MW power,
would come up in the 11th Plan. Moreover, the government has earmarked a
total capital subsidy of US$ 6.88 billion for providing electricity connections and
for the distribution of infrastructure to rural households.
Nuclear Power Generation
Subsequent to the Indo-US nuclear deal and India getting clearance from the
Nuclear Suppliers Group (NSG), nuclear power generation is likely to provide an
opportunity of US$ 10 billion in the next five years, according to a JP Morgan
estimate. India will now also be partnering several countries for nuclear fuel technology projects.
• As a part of the Eleventh Five-Year-Plan, Nuclear Power Corporation of
India Ltd (NPCIL) will be commencing work on 12 reactors. NPCIL will be
developing a series of nuclear reactors with capacities between 1,000 MW
to 1,650 MW at 5-6 sites along the country's coastline.
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• GE Hitachi Nuclear Energy has tied up with NPCIL and Bharat Heavy
Electricals Ltd (BHEL) for building multiple GEH-designed nuclear reactors.
• Sweden sees a market of around US$2 billion in India for back-end
operations like nuclear waste management.
• NTPC Ltd and NPCIL would jointly invest around US$ 3.09 billion in the next
eight years to set up nuclear power plants in the country.
• BHEL plans five joint ventures in the nuclear sector and locomotive
manufacturing. The company has decided to invest US$ 204.4 million in a
castings and forgings joint venture.
• French-major, Areva is planning a large scale nuclear reactor forgings
facility in India with Bharat Forge and will invest over US$ 408.79 million in
two shell companies.
Investments
According to an ASSOCHAM study during January-June 2008, investment
announcements totaling to US$ 40.84 billion were made in the power sector.
• Reliance Power Transmission will invest nearly US$ 348.66 million in setting up
a 1,500-km transmission line. • Hyderabad-based Greenko Group plans to invest about US$ 300 million in
three years for setting up about 15 clean energy projects in the country.
• Japan Bank of International Cooperation (JBIC) has agreed to lend US$
153.1 million to L&T-MHI Boilers Private Ltd (LTMB) for manufacturing and sale
of thermal power generation facilities in India. • Private power equipment makers such as Alstom and Toshiba will set up
their power manufacturing base in India in the next three-four months.
• The National Thermal Power Corporation (NTPC) has signed a
Memorandum of Understanding (MoU) with the Chhattisgarh government
to set up a 4000-MW power project in the state. The project cost has been
estimated at US$ 4.09 billion.
• Sterlite Industries, the country’s largest private sector power producer, is
planning to invest US$ 4.1 billion over the next year to create additional capacity of 4,500 MW.
• Power Finance Corporation (PFC) will raise US$ 4.75 billion by the end of this
fiscal for financing various power projects.
• The Haryana government has drawn up an investment plan of US$ 377.48
million for the current financial year to strengthen the power distribution system in the state.
Government Initiatives
15
The government has taken several proactive steps to open the sector for the
private players and realize the full potential of the country in the power sector.
• Introduction of the Electricity Act 2003 and the notification of the National
Electricity and Tariff policies.
• Constitution of Independent State Electricity Regulatory Commissions in the
states.
• Allowing the private sector to set up coal, gas or liquid-based thermal
projects, hydel projects and wind or solar projects of any size.
• Allowing foreign equity participation up to 100 per cent in the power sector
under the automatic route.
• Providing income tax holiday for a block of 10 years in the first 15 years of
operation and waiver of capital goods' import duties on mega power
projects (above 1,000 MW generation capacity).
• The government has also taken up some ambitious programmes like the
Ultra Mega Power Projects (UMPP), Rajiv Gandhi Grameen Vidhyutikaran
Yojana (RGGVY), Accelerated Rural Electrification Programme and the
goal of Power for All by 2012 among others to rapidly increase the installed capacity.
Looking ahead
A recent study by consultancy major McKinsey estimates India's power
demand to increase from the present 120 gigawatt (GW) to 315 GW–335 GW
by 2017, if India continues to grow at an average of 8 per cent over the next 10
years. This would require a five- to ten-fold rise in power production, entailing
investments worth US$ 600 billion over the next ten years.
To feed its rapidly growing economy, India is planning to get an additional
60,000 MW of electricity from various hydro-power projects by the end of 2025.
The government targets providing electricity for all by 2012. Under the Rajiv
Gandhi Grameen Vidyutikaran Yojna, the Ministry of Power plans to electrify
120,000 villages in the current Five Year Plan (2007–12).
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________________ ____ _________________________
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sources believed to be reliable but we do not represent that it is accurate or complete and it
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affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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