Insights Report on Nakoda Limited by Ventura Securities

Power business to boost profitability and reduce sector specific risk
Nakoda has a small presence in the renewable energy space through its 6.75 MW wind power project in Tamil Nadu which was commissioned on October 2010. It plans to commission another 5.25 MW of wind power from its second project located in Madhya Pradesh in March 2011. In CY2012, we expect revenues of Rs 12.68 crore and profits of Rs 5.69 crore from the wind power business.

Nakoda is contemplating further investments in the power segment and has ambitious plans of setting up off over 500 MW of wind power generation across various sites located throughout India. The investments required for such a large expansion are sizeable and Nakoda is planning to set up a SPV for the same. However these plans have yet to be firmed up and hence have not been factored in our valuations.

Attractive Valuations

We have valued Nakoda at a 20% discount to peak cycle valuations. Initiate with a BUY for a Price Objective of Rs 37 (target PE of 4.6x for CY2012) over an 18 month horizon representing a potential upside of 154%. ROE and ROCE set to improve from the 24% & 15% to 25% & 20% respectively by CY12. Key concerns sluggish economic recovery and sharp spurt in raw material due to rising crude prices