Positive consensus building on JP Power amongst analyst

Jaiprakash Power Ventures Limited (JPVL), a part of the Jaypee Group was incorporated in 1994. The company owns and operates the 300 MW Baspa-II Hydroelectric Project at District Kinnaur, Himachal Pradesh , 400 MW Vishnuprayag Hydroelectric project, at District Chamoli, Uttarakhand and 1000 MW Karcham-Wangtoo at District Kinnaur, Himachal Pradesh. All the plants are run-of-the-river hydroelectric power projects.

The company is also implementing the 1320 MW (2X660 MW) super critical technology boiler pit head based Nigrie Thermal Project at District Singrauli in the state of Madhya Pradesh .The company has also subscribed 74% of the equity capital of Jaypee Powergrid Limited (JPL), developing a 214 km long power transmission project to evacuate power from the Karcham Wangtoo project. The company through its subsidiary Jaypee Arunachal Power Limited is implementing two projects in Arunachal Pradesh, the 2700 MW Lower Siang & 500 MW Hirong. JPVL has also extended into implementation Agreement with Government of Meghalaya to set up 270 MW Umngot and 450 MW Kynshi Stage –II hydro power projects.

The Group is poised to be a 13,470 MW power producer by 2019.

The stock has given negative returns of 71 percent and is trading at a P/E of 13. Given its cheap valuations the stock is recommended to buy by various brokerage houses. Whereas the cash flow problems persist and the pressure is expected to remain in near term, several brokerage houses have given buy recommendations including IDFC Securities, ICICI Securities & Emkay Global. The consensus target for the stock is Rs. 11. This presents a good upside potential for investors with a 2 to 3 years view. The current government’s focus on infrastructure and power sector is a positive for the stock.

There is a positive consensus building in the stock and it augurs well for the stock. Currently promoters hold 63.6 percent in the company and 5.5 percent is held by FIIs. The DIIs hold around 4.7 percent in the company and the rest is held by public at large.

JP Power venture has hurt investors in the past. The stock has given negative 44 percent on YTD basis. The stock has fallen by 9 percent approximately in past 1 month. On a 3 months basis the stock has given negative 33 percent. The dividend yield for the stock stands at 1.02 percent at current levels. Risky investors can have a look at this counter with a fairly long term view.