BUY NEYVELI LIGNITE CORPORATION LIMITED (513683)

CMP: 90

Target: 150 in 6 months

NLC is a government-owned lignite mining Indian company, which is wholly owned by the Union Government (49%) and administered via coal ministry. It is recently announced as "Navratna" by Government of India in April 2011. NLC Neyveli spreads over an area of around 54 square km, comprising Neyveli Township and temporary colonies around 32 blocks. The company runs the biggest open-pit lignite mines in India and mines around 2.4 Croretonnes of lignite annually for fuel, with an installed capacity of 2490 MW of electricity per annum.

NLC now elaborated its project to Rajasthan also in mining as well as thermal stations, 3 big mines also supplies a huge amount of sweet water to Chennai. The Tamil Nadu electricity board has a JV with the Neyveli Lignite Corporation Ltd (NLC) for two projects – A 1000-MW coal-based project at Tuticorin in southy Tamil Nadu at the cost of Rs.4000 crore and the Jayamkondam lignite power project at a cost of Rs.5000 crore for 1000 – MW power plant. The company announced its plans to invest about Rs.36,900crore on power generation and mining capacity augmentation by 2017. The company has also planned to develop clean coal technologies like extraction of coal bed methane (CBM) and Underground coal gasification for which several steps have been taken. It is developing power projects using other fuel feed. The company is also planning to invest Rs.40,200crore to build power plants in Tamil Nadu, Rajasthan and Uttar Pradesh.

The coal price has risen by 50% due to which Tamil Nadu Govt has increased Electricity Power tariff by 30%, and imported coal also raised upto 60% due to Rupee devaluation which will directly benefit NLC for ownership of their mines.

Strong expansion & diversification plans to explore coal-based, wind and solar power generation projects will add on strength to the cashbook.

We recommend `BUY' on the stock at CMP Rs. 90 with a target price of Rs. 150 in 6 months