Jaiprakash Power Ventures - Result below expectations; u/g to Hold on valuations - Emkay

Reco: HOLD
CMP: Rs 26
Target Price: Rs 32

- 4Q13 below estimates. Loss before tax at Rs2.03bn due to 1) Rs150mn under recovery in Bina vs. exp of break-even, 2) transmission charge of Rs600mn for prev quarters and 3) lower generation in Karcham due to maintenance shutdown

- In Bina, JPVL has charged cost at 61% of both units but recovered revenues only for 1st unit

- However, we raise FY14/15 est. (+6.9%/+14.6%) on - 1) assumption of 30% and 50% merchant sale in Bina and Nigrie respectively vs earlier assumption of 100% PPA and 2) 8-15 months delay in COD of Bara TPP (now Dec'14-Dec'15)

- Even though project level PAT should grow, cash flow issues to continue for the next 2-3 years, leading to higher dilution and higher cost of refinancing. This will dilute EPS at the parent level. Expect FY14/15/16 EPS Rs2.8/4.1/4.7

- Valuations at 1.1x FY14E book (assuming 14% dilution), implying limited downside. But do not see significant upside even after assuming best case scenario. Upgrade to Hold with a revised PT of Rs32/sh (avg. of P/E and DCF)

Source : Equity Bulls

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