Nomura says to cut back on Reliance Power

Nomura has retained ‘Reduce’ rating on Reliance Power, and reduced the target price to Rs94, from Rs121. Analysts, led by Anirudh Gangahar, said that a majority of RPower’s earnings are from three projects – Chitrangi, Sasan II and Samalkot.

However, operational timelines and profitability in these is subject to regulatory and fuel supply risks. The analysts are assuming the Samalkot plant will be idle till March 2015 due to unavailability of gas.

The stock is trading at a premium to its peers, with a FY14 forward price-to-earnings of 30x and price to book value of 1.7x, the analysts said.