NLC India share price jumped over 4% in early trade on Tuesday after Elara Securities initiated coverage on the stock with a bullish view. NLC India is a multibagger PSU stock that has given more than 115% returns in the past one year.
Elara Securities initiated coverage on the state-run ‘Navratna’ company NLC India with a ‘Buy’ rating and assigned a target price of ₹373 per share, implying an upside potential of over 36% from Monday’s closing price.
NLC India is the nodal agency for lignite mining in India with a consolidated generation capacity of 6 GW and has plans to ramp up its total capacity to 20 GW by FY30. It aims to expand its mining capacity to 104 mtpa from 50 mtpa currently. At present, 1.4 GW of renewable energy (RE) plants are operational and NLC aspires to increase this capacity to 10 GW by FY30.
As the designated nodal agency for lignite mining in India, NLC controls more than 50% of the country’s lignite reserves. The company currently has a regulated equity of ₹9,500 crore, with ₹5,900 crore allocated to its power generation business and ₹3,600 crore to mining. The management plans to increase regulated equity to ₹18,900 crore by 2030.
According to Elara Securities, expansion of regulated equity on the back of buoyant project pipeline should drive revenue and PAT CAGRs to 15% and 20% through FY24-27E.
The brokerage firm expects the PSU company to report a revenue CAGR of 15%, an EBITDA CAGR of 20% and a PAT CAGR of 20% over FY24-27.
“We assign a P/BV of 1.8x to NLC’s regulated thermal business, based on 15% ROE assuming the cost of equity at 10.5% and growth of 5%. We value the regulated thermal business at 1.8x FY30E P/BV discounted to FY27E and the regulated mining business at 1.8x FY30E P/BV discounted to FY27E. We ascribe the RE business a value of 10x FY27E EV/EBITDA and the merchant coal business, 4x FY27E EV/EBITDA,” Elara Securities said.
However, it believes the challenges in land acquisition and delayed payments or defaults by distribution companies (DISCOMs) are key risks.
NLC India share price
NLC India share price has gained over 22% in the past three months, while the stock is up just over 9% year-to-date (YTD). However, the PSU stock has given multibagger returns of over 115% in one year and more than 435% in the past three years.
At 11:00 am, NLC India shares were trading 2.85% higher at ₹281.15 apiece on the BSE.
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