Tuesday, August 21, 2012


Nava Bharat Ventures’ (NBV) Q1FY13 adjusted standalone earnings came in at INR684mn, higher than our estimate of INR511mn. Earnings from the power business were up due to higher merchant realization of ~INR5/kwh (estimated INR4/kwh) while the sustained performance of the ferro alloys division aided profits further. Commissioning of pipeline capacities and a scale up in Zambia mines will boost earnings, going forward. Maintain ‘BUY’ with target price of INR290/share.

Adjusted PAT better than estimates
NBV’s standalone revenue at INR2.7bn was in line with our estimates of INR2.6bn though the adjusted PAT at INR684mn (INR33mn of forex losses) was better than our estimate of INR511mn. Power segment performance was robust on the back of a better‐than‐expected net merchant realisation of ~INR5/kwh during the quarter against our full year average estimate of INR4/unit. While costs for the Ferro alloy division have gone up, realizations have also increased 18% YoY to INR60K/t, improving the performance of the division. The management is guiding for a sale volume of 75KT of silico manganese and a 50KT conversion agreement with Tata steel.

Projects in pipeline on track
The under construction Orissa 64MW unit is expected to be synchronized in Q4FY13 post approval from the Orissa Power Transmission Company. Zambia coal mines have begun sale of high grade coal locally (sold ~6K tonnes, yielding PBT of @USD10/tonne in Q1) and are likely to scale up from 400KT in FY13 to 1MT by the end FY15. The older Orissa 64MW plant, which was under Section 11, has resumed operations and is selling ~20MW to GRIDCO and the balance on merchant (through the exchange).

Outlook and valuations: Near term trigger; maintain ‘BUY’
With the commissioning of Orissa 64MW project as the near term trigger and higher merchant prices tied up in the short term, we expect earnings to be firm. At CMP of INR191/share, the stock is trading at an attractive multiple of 7x and 6x FY13E and FY14E earnings respectively. Maintain ‘BUY’ with SOTP based TP of INR290/share.

To read report in detail: NAVABHARAT VENTURES