Citigroup has reiterated its ‘Buy’ rating on Jindal Steel and Power (JSPL)
It values JSPL’s power business using a discounted cash flow approach as power plants generate largely predictable cash flows for fixed time periods.
Citigroup said it prefers FCFE as individual projects are highly geared and gearing changes as debt is rapidly paid off.
One of the Citigroup analyst said, “We value JSPL’s steel business at 7x arch14 EV/EBITDA and discount steel equity value to March ’13 using 15% COE. If we assume JSPL executes all its power projects in line with our assumptions, we arrive at a value of Rs. 672/share. This includes Rs. 250 for the steel business, .Rs, 307 for Jindal Power, Rs. 68 for 1,350 MW captive power plants and Rs. 41 for excess power purchased from JPL at fixed prices”
It values JSPL’s power business using a discounted cash flow approach as power plants generate largely predictable cash flows for fixed time periods.
Citigroup said it prefers FCFE as individual projects are highly geared and gearing changes as debt is rapidly paid off.
One of the Citigroup analyst said, “We value JSPL’s steel business at 7x arch14 EV/EBITDA and discount steel equity value to March ’13 using 15% COE. If we assume JSPL executes all its power projects in line with our assumptions, we arrive at a value of Rs. 672/share. This includes Rs. 250 for the steel business, .Rs, 307 for Jindal Power, Rs. 68 for 1,350 MW captive power plants and Rs. 41 for excess power purchased from JPL at fixed prices”
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