Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
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<strong>Institutional</strong> <strong>Equities</strong><br />
EPC segment valued at EV/EBITDA of 5x<br />
We have valued the EPC segment at 5x EV/EBITDA on FY13E earnings, which is 25% below the lower end of<br />
the average range for pure construction companies. The company has EPC order book of Rs280bn, which is<br />
primarily from Reliance Power. Hence, a 25% discount is justifiable as compared to a pure EPC player.<br />
Exhibit 4: EPC segment valuation<br />
EBITDA (FY13, Rsmn) 6,483.84<br />
Average EV/EBITDA<br />
6x-8x<br />
25% discount to lower band 5x<br />
EV 32,419<br />
Rs/share 121<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
Infrastructure projects valued on P/BV, DCF<br />
The company has a portfolio of eleven road projects, three metro rail projects and five power transmission<br />
lines. We have valued the operational projects on DCF basis and under-development projects on P/BV basis.<br />
Though the infrastructure business contributes about 27% to our target price, we believe that going ahead this<br />
segment will be a key driver of valuation and earnings growth and the company best positioned in terms of<br />
Balance Sheet strength to support the equity commitment for future projects.<br />
Exhibit 5: Infrastructure projects valuation<br />
Infrastructure projects Model Rs/share<br />
Road projects BOT CoE-16% 149<br />
Metro rail projects BOT CoE-16% 27<br />
Power transmission projects BOT, regulated CoE-16% 14<br />
Total - - 191<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
38% stake in Reliance Power<br />
Reliance Infrastructure has a 38% stake in Reliance Power, which is executing 18,840MW power generation<br />
project. We have valued Reliance Power stake at a 30% holding discount to the CMP and arrived at a<br />
valuation of Rs 223/share (around 60% CMP of Reliance Infrastructure).<br />
Exhibit 6: Reliance Power valuation<br />
CMP (Rs) 80<br />
No. of equity shares (mn) 2,805<br />
Mkt cap (Rsmn) 224,408<br />
Holding discount 30%<br />
Stake 38%<br />
Value of equity (Rsmn) 59,693<br />
Rs/share 223<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
Exhibit 7: Reliance Power project portfolio<br />
Plant name Capacity (MW) Type<br />
Butibori 600 Coal<br />
Samalkot 2,400 Gas<br />
Sasan UMPP 3,960 Coal<br />
Krishnapatnam 3,960 Coal<br />
Chitrangi power project 3,960 Coal<br />
Tilaya UMPP 3,960 Coal<br />
Source: Bloomberg, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
43 Reliance Infra
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