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IDBI Capital
Nava Bharat Ventures (Buy)
Target: ₹75
CMP: ₹47.70
Nava Bharat Ventures Q1-FY21 profitability was better than expected due to higher than expected profits from its Zambian operations. The company’s EBITDA was 37 per cent above our estimates.
NBVL’s EBITDA fell by 10.7 per cent y-o-y to ₹282.40 crore as ferro alloys profitability fell sharply (segment EBIT down 74.7 per cent y-o-y to ₹4.6 crore). Nevertheless, its Zambian step-down subsidiary, Maamba Collieries (MCL) sales improved 16.3 per cent y-o-y to $66 million and average PLF of its power plants stood at 93 per cent vs 81 per cent in Q1-FY20.
We raise our FY21 sales/EBITDA by 8 per cent and 22 per cent respectively led by stronger than expected performance form MCL. We also raise FY22 sales/EBITDA forecasts by 12 per cent and 23 per cent respectively, as we expect strong profitability at MCL to sustain.
We maintain our buy rating on the stock given inexpensive valuation. Out SOTP-based target price stands at ₹75 (earlier ₹70).
NBVL aims to dilute stake in subsidiaries/step-down subsidiaries, monetise its sugar assets, and monetise idle power units. These events are likely to be catalysts for the stock performance. Any significant payment by utility company to MCL and subsequent fall in net debt will be a key monitorable.
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