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Reliance Power – JPM Initiates Coverage

June 25, 2008

Finally, we have a brave soul [JP Morgan] initiating coverage on Anil Ambani’s yet to take off shell company – Reliance Power Ltd [RPL].

RPL aspires to emerge as India’s leading private generation utility with 28.2 GW by 2015. Reliance Power is a play on India’s looming power deficit and needs to step up private investments. The backing of the ADAG group with strong execution / funding capabilities and a headstart in tying up equity funds place RPL at a sound position to attain its targets.

JPM is expecting Reliance Power to execute in a sunny day scenario. According to JPM’s estimates, Reliance Power should report revenues of Rs 118 cr and Rs 2,192 cr. EBITDA of Rs 57.6 cr and Rs 1,031 cr for FY2010 and FY2011 respectively.

JPM Values RPL based on DCF for individual project SPVs [Sasan, Dadri, etc]. JPM has set a price target of Rs 190.

However, most of Reliance Power’s energy is Dirty and the long gestation for the company’s projects to commence and generate earnings/cash flows may restrain the stock performance.

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