>NEYVELI LIGNITE: Q4FY10 (ICICI DIRECT)

Steady growth lined ahead…
In Q4FY10, Neyveli Lignite (NLC) reported ~44% YoY growth in topline from Rs 766 crore to Rs 1,103 crore compared to our expectation of ~21.5% growth in topline. On the volume front, NLC has delivered de growth of ~8.9 % YoY from 5,044 MU to 4,593 MU in line with our
expectation. In FY10, NLC has witnessed the highest lignite production of 22.3 MT compared to 21.5 MT in the same period last year and simultaneously achieved the highest generation since the beginning of 17,658 MU compared to 17,457 MU for the same period last year. NLC has benchmarked a growth of 8% over the next year targeting an overall generation of 18,758 MU in FY11E.

■ Despite delays Barsinger progressing well
The first unit of the 2x125 MW Barsinger Lignite project was synchronised in October 2009. The company is still to achieve commissioning, which is expected by June 2010. In the meantime, the company has been able to achieve full production capacity at the Barsinger mine in January 2010. The second unit is expected to achieve synchronisation in August 2010. The Barsinger mine has already commenced operations and achieved full capacity with an initial production of 1.02 lakh tonne lignite in FY09.

■ Expansion plans materialising well
In addition to the plans under construction of 1,800 MW (thermal and wind plans), Neyveli Lignite has submitted the feasibility report for the Bithnok Lignite mine cum project (2.5 MTPA and 250 MW power plant) and new thermal power project at Neyveli (2x500 MW in lieu of TPS – I) to the Ministry of Coal and sanctions for the same are still awaited.

Valuation
At the CMP of Rs 144, the stock is trading at FY10 P/BV of 2.3x and FY11E P/BV of 2.2x. The stock looks fairly valued. The plans in lieu of refurbishing the existing capacity at TPS-I are progressing well. Thus, we have upgraded our rating to ADD from SELL with a price target of Rs 151.

To read the full report: NEYVELI LIGNITE