Oriental Green Power Ltd – the Share Price Could Double In Four Months

Orient Green In Stock Markets

Source
Ramagundam Thermal Power Station, Andhra Pradesh, India
Ramagundam Thermal Power Station, Andhra Pradesh, India | Source

Oriental Green Power


Q1 not satisfactory

There is a peculiar result put up by an Indian company called Orient Green Power Ltd. For the quarter ended 30.06.11, the company’s revenue increased from Rs.0.50 crore in Q4 ended 31.03.11 to Rs.1.24 crore. Its net profit decreased from Rs.5.68 crore to Rs.3.20 crore. For the full year 2010-11, the company’s revenue was at Rs.2.24 crore and its net profit was at Rs.5.21 crore. The peculiar thing is that the company’s net profit is more than its revenue. This kind of result is possible only when the company’s main business is stagnating and it has received huge profits because of sale of its assets or writing back its provision for taxation. The operating profit of the company declined from 1353% to 368%. Its net margin declined from 1133% to 258%. The shares of Orient Green are traded in the Indian stock markets at Rs.15 now. They were traded at a yearly high of Rs.44 on 21.10.10. They were at a yearly low of Rs.11 on 05.08.11.

Came out with an IPO in September 2010

The company is engaged in renewable energy sector. The company planned to add 95 MW in the third quarter of the current year and another 50 MW in the fourth quarter. P Krishnakumar is the Managing Director of the company. The company’s plans included an addition of 40 MW of wind and 55 MW of biomass capacity. The fourth quarter plan included all wind energy. The company commenced its financial year with a capacity of 220 MW. Out of this, 40 MW was of biomass and the rest wind energy. The company plans to end the financial year with a total capacity of 435 MW. Orient Green came out with an initial public offer (IPO) in September 2010. It plans to add 200 MW in 2012-13 in Andhra Pradesh and Karnataka.

Sale of RECs

Orient Green secured permission from Tamil Nadu’s power generation and distribution utility TANGEDCO for bringing its ‘group captive capacity’ under REC mechanism. Many of the company’s wind power consumers have a minimum of 26% stake in the subsidiaries of the company that own the wind farms. With the permission obtained by the company, all its prospective capacity of power generation will be put under REC mechanism. But the company has not disclosed how much it will be earning by selling the RECs. Company analysts have calculated that the company will be earning Rs.30 crore out of carbon trading and RECs. Out of this, the share of RECs will be Rs.20 crore.

Turnover Rs.450 crore projected

Recently, Orient Green synchronised its 10 MW biomass power plant near Pollachi into the Tamil Nadu grid at Angalakurichi in Coimbatore district. The plant is unique in India with a specially designed boiler, which mainly uses the coconut fronds that are available in the local area. The plant is also unique in the sense it is the only plant in the Western part of Tamil Nadu State. The facility enjoys 110 kV connectivity. The company is a part of the Chennai-based Shriram group. Orient Green has plans to put up six biomass based power plants before the current financial year. Orient Green is expected to generate 906 million RECs in the current year and 1425 million RECs in next year. The government has fixed the floor price of REC at Rs.1.50 per unit and ceiling price at Rs.1.90 per unit. The company projects a turnover of Rs.450 crore and a net profit of Rs.70 crore in the current financial year 2010-11.

Short term gains possible

There is very little downward risk at the current market price of Rs.15. If the projections of the company come true, the share will bring hefty short term reward to the investors. The share price could double in around four months if everything goes right for the company.

Orient Green Power Ltd

(Rupees in crore)
June 11
December 10
FY 2010-11
Revenue
1.24
0.50
2.24
Net Profit
3.20
5.68
5.21
OPM %
368
1353
355
NPM %
258
1133
232

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