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1. NHPC has been trading for only a few months. Is it possible to decide crucial supports? 2. On what basis can one think about Rs. 18, given that this is uncharted territory = NHPC hasn't traded at this level previously? Or is this a valuation based on fundamental considerations?
PS: I'm not interested in NHPC in particular, just the concepts.
Two questions: 1. NHPC has been trading for only a few months. Is it possible to decide crucial supports? 2. On what basis can one think about Rs. 18, given that this is uncharted territory = NHPC hasn't traded at this level previously? Or is this a valuation based on fundamental considerations?
PS: I'm not interested in NHPC in particular, just the concepts.
NHPC will be rerated once Satluj Jal Nigam IPO opens, there are many projects which are bieng jointly executed by NHPC & Satluj Plus NHPC holds conderable stake in Satluj
Regarding NHPC coming to Rs. 18/- who knows, Tata motors traded at 70 bucks in 1995-1996 after trading for considerable time above Rs. 1000/- one should be prepared for any such eventuality, My Opinion NHPC has strong support at 30/- twice it has touched that level to bounce back, a lot of patience is required in holding the stock, I am sure in the long run it will pay you handsomely.
NHPC will be rerated once Satluj Jal Nigam IPO opens, there are many projects which are bieng jointly executed by NHPC & Satluj Plus NHPC holds conderable stake in Satluj....
Just out of curiosity ....
If the NHPC+Satluj tie-up is public knowledge, won't the synergy already be factored into NHPC's CMP?
Why not, Alchemist? Your analysis is spot on; just wanted to know what your reasoning was/is for NHPC being a laggard.
Power companies can grow revenues in two ways:
- Getting better rates for the power that they sell.
- Adding more capacity.
In case of hydropower companies both are difficult.
1. In India most of the power companies have to sell power at regulated rates, which caps the profit margins of these companies and prevents them from making abnormal profits.
2. Hydropower companies have an additional drawback. They take a lot of time to add new capacity.
- Lot of clearances and permissions are need for hydropower companies
- Planning and execution also takes more time than thermal power projects.
- Displacement and relocation of affected people has also become a major issue now.
- Total hydropower potential of the country has an upper limit. A thermal power plant can be setup anywhere there is vacant land, but a hydropower plant can only be setup where there is flowing water.
These are the two primary reasons why I feel hydropower companies will under-perform the markets in the long run.
1. In India most of the power companies have to sell power at regulated rates, which caps the profit margins of these companies and prevents them from making abnormal profits.
That was quite educative; thanks. If #1 above is true, how come REC is thriving?
This is a safe and sound investment at current levels. The stock is available at 1.4 times the book value.
The stock is available at a p/e of 15. A large number of projects were expected to be complete by 2012 but now they might be delayed to 2013.
But, the cmp is too low and I guess all the negatives have been factored into the stock price.
The company has an assured post-tax return of 15.5% and comparing it with the present book value of 1.4, the stock price appears to be cheap.
It is a GOI enterprise and therefore the risk is quite low. It is a great company available at great valuations.
It can be bought with a 3 year perspective with a target price of Rs 54. This means that a person can double his/her investment.
Reason- EPS will increase to at least Rs 3 with the commissioning of new projects. It should trade at a p/e of 18. Therefore the target price is Rs 54.
Its subsidiary NHDC is performing well and it will add further value. Also, its jv project with SJVNL and Manipur Government can add value.
Also, its new projects will be getting VER's as well which will add to more value creation. Thus, it is a screaming buy at current levels.
Disclosure:- I might be wrong. I purchased 600 shares at Rs 28 i.e. more than cmp. The best thing about this stock is the safety. I will buy more shares only if it falls to Rs 24 and not before that.
Last edited by ajitpalsingh : 23rd January 2011 at 02:24 AM.
Reason: Forgot to mention about its subsidiary NHDC and jv projects
If you have paying a price that is much higher than the book value, your return as an investor will be lower.
Yes, that is correct. I meant that a company having ROE at 15.5% is attractive at 1.4 price to book.
So of the added advantages:-
1) They have a department for preparation of project reports and which had a revenue of more than Rs 100 crore.
2) In future, government might allow selling of power on merchant basis upto 40% of total power produced. It will enhance the earnings substantially.
3) It is free from variations in coal prices for obvious reasons.
4) VER's can be a substantial value adder.
Risks:-
1) Flow of rivers is not consistent.
2) Most of its projects are in tribal areas which pose a major challenge and therefore it is trading at a substantial discount to NTPC. NTPC is 2.47 times book and NHPC is 1.4 times book.
The current price offers a good return-risk ratio and therefore it is looking attractive.
NHPC looks attractive in current levels but what will be the trend for this counter?
Upword or downward?
I am not sure about the trend.
The stock is available at decent valuations. If it is able to show better results, then definitely it will have a lot of institutional buying.
I checked the share holding pattern and it is showing that in the last 2 quarters fii's have increased their stake although the overall stake held by them is still quite low. It is only 1.84%, dii's is 2.72% and other's is 9.08%.
This goes on to show that it has the potential for a lot more of institutional buying. Therefore, the trend might change if the company continues to perform well.
1. NHPC has been trading for only a few months. Is it possible to decide crucial supports? 2. On what basis can one think about Rs. 18, given that this is uncharted territory = NHPC hasn't traded at this level previously? Or is this a valuation based on fundamental considerations?
PS: I'm not interested in NHPC in particular, just the concepts.
Vasa!
Let me come back to your question.
Hope slowly you will agreed with me on the level that I mentioned earlier. .
If not then still you have time to agree.
We are reaching to the target soon. So keep yourself tight.
I think NHPC is a good stock to pick up for long-term in the market crash.
- Profits are growing YoY.
- Demand for it's product will exist even in case of severe recession.
- It does not have any recurring fuel expenses. As long as we have good monsoons the fuel is free.
- "Work in progress" capital expenditure will fuel future growth.
I think NHPC is a good stock to pick up for long-term in the market crash.
- Profits are growing YoY.
- Demand for it's product will exist even in case of severe recession.
- It does not have any recurring fuel expenses. As long as we have good monsoons the fuel is free.
- "Work in progress" capital expenditure will fuel future growth.
I am planning to buy in small quantities on dips.
Sudhash but the problem with this share is all knows it's a zero debt company.And the net profit it makes comes around 40% .But still it not even once touch figure higher than its ipo rate of 36 ever. Market sentiments doesn't affect this share. It doesn't go too much down when market goes.But same is true vice versa .You hardly see any moments.
Personally I hold this share and i feel it's a ULIP of stock market, hardly any return or negative return.
One interesting thing about this stock which I see is the share holding.
Though government have 86% share.
The total number of shares of the company is 1230 crore+ shares.
Out of which 1062 crore is with government and general public holds only 8.8%.
With such a huge quantity I have a feeling fpo and other disinvestment option might happen in near future and from the time the ipo came at 36, the highest the stock touch was 38 or 40.
I no longer feel the stock to be a safe bet.
Though in one of my account I have 250 shares at 32.
I'll try to exit as soon as I just get 5-10% return from it.
I don't see it as value long term investment because companies have such large quantity normally trade in single digit figure, hence the more the government frees the stock more the trading and people won't hold this stock for long as you don't hear about this company much.
If I am getting Reliance at 750 why should I look at nhpc right now?
Q: What is going on with NHPC today, the stock got hammered down to Rs 20?
A: This is a typical problem with NHPC. Whenever Q2 results are good, we get enthused, but we must realise that it is traditionally always the best quarter for any hydro power project. With such wonderful monsoon in the northern part of the country, obviously, the Q2 performance was very good for NHPC. We have seen the share price moving to Rs 26- 27 and at that time, I had given my negative view that I was not gung-ho on the stock but some buy reports came with a target of Rs 30-32.
If you take a longer call on the stock, I don’t think there are any fundamental attraction. The debt is close to Rs 12000,-13,000 crore and not much capacity additions are likely to happen. There is also huge equity base of Rs 12000-13000 crore. I don’t think all these can really excite anyone, especially when you have so many ideas available in thermal power generation space. This is bound to happen because interest keeps diminishing with each passing day and that is the reason we are seeing the stock getting corrected gradually.
1. NHPC has been trading for only a few months. Is it possible to decide crucial supports? 2. On what basis can one think about Rs. 18, given that this is uncharted territory = NHPC hasn't traded at this level previously? Or is this a valuation based on fundamental considerations?
PS: I'm not interested in NHPC in particular, just the concepts.
Buddy, have a look on stock price. Now I think you already got the answer.
I don't have to reply
Unfortunately chart is damaged (which is expected) due to market condition.
It might have not stopped falling but it's reasonable price to accumulate and forget your money for years for long run investors.
NHPC (National Hydroelectric Power Corporation)
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