Comments
Target: ₹373
CMP: ₹279.85
NLC India, a Navratna central public sector enterprise (CPSE), enjoys an extensive presence across varied energy multiverses – viz., lignite and coal mining, power generation, power trading, and consultancy for mining and power sectors.
We initiate coverage on NLC India (formerly Neyveli Lignite Corporation) with a Buy and an SoTP-TP of ₹373, implying a 35 per cent upside from the CMP. Through FY24-27, we expect a revenue CAGR of 15 per cent, an EBITDA CAGR of 20 per cent and a PAT CAGR of 20 per cent. We assign a P/BV of 1.8x to NLC’s regulated thermal business, based on 15 per cent ROE assuming the cost of equity at 10.5 per cent and growth of 5 per cent.
We value the regulated thermal business at 1.8x FY30E P/BV discounted to FY27E and the regulated mining business at 1.8x FY30E P/BV discounted to FY27E. We ascribe the RE business a value of 10x FY27E EV/EBITDA and the merchant coal business, 4x FY27E EV/EBITDA.
Announcement of fresh project pipeline and Higher growth in regulated equity are valuation triggers.
Challenges in land acquisition and delayed payments or defaults by distribution companies (DISCOMs) are key risks.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.