>Jaiprakash Power Ventures Ltd (ICICI DIRECT)

On a firm footing…
Jaiprakash Power Ventures Ltd (JPVL), a part of the $7 billion Jaypee group, is the result of amalgamation between the erstwhile Jaiprakash Hydro Power (JHPL) and Jaiprakash Power Ventures (JPVL). The combined entity has a successful track record of operating 700 MW of hydro projects - Baspa-II (300 MW) commissioned in 2003 and Vishnu Prayag (400 MW) commissioned in 2006. In FY09, the erstwhile JHPL generated 1,291.9 million units (MU) while JPVL generated 2,033.3 MU vis-à-vis 1,280.8 MU and 1,871.0 MU in FY08, respectively. The conglomerate entity is aiming to achieve ~13,500 MW of installed capacity by FY19E with a diversified fuel mix. JPVL is expected to command an optimal 60:40 thermal-hydro mix. The upcoming hydro project at Karcham Wangtoo (1,000 MW) is well on track to achieve the commissioning six months ahead of schedule in May 2011. The parent company (JAL) has demonstrated significant execution strength clubbed with better operational performance at existing projects. Thus, we are initiating coverage on the stock with an ADD rating.

Total ~16 fold growth in installed capacity over the next six years
JPVL has an installed capacity of 700 MW as at the end of December 2009. The company has an ambitious growth plan and is targeting ~11,050 MW by the end of FY16E. Total ~1,500 MW is expected by FY12E. JPVL is diversifying into other fuel mix with the first thermal plant Bina – I expected in the second half of FY12.

Superior asset quality getting reflected in operational numbers
JPVL is generating at an implied plant load factor (PLF) of ~100% in the peak flow season. This is far in excess of the overall PLF generated by hydro-based capacities in India. For FY09, the overall Indian hydro generation is operating at an implied PLF of ~34.1% and JPVL is commanding a much superior implied PLF of ~54.6%.

Valuations
At the CMP of Rs 67, the stock offers ~6.2% upside potential. JPVL has 700 MW of plants operational, which comprises Rs 17 per share and ~24% in overall value. Expansion plans form the remaining portion of overall value. The demonstrated capability of parent company (JAL) renders significant comfort to upcoming expansion plans. Thus, we initiate coverage on the stock with ADD rating and target price of Rs 71.

To read the full report: JAIPRAKASH POWER