Result Update

February 13, 2012

Rating matrix
Rating Target Target Period Potential Upside : : : : Hold | 94 12 months -2%

Neyveli Lignite (NEYLIG)

| 97
WHATS CHANGED
PRICE TARGET........................................................................... Changed from | 91 to | 94
FY12E 4407.9 1344.9 1247.0 1247.0 FY13E 5034.0 1809.9 1233.0 1233.0

Key Financials
(| Crore) Net Sales EBITDA Net Profit Adj. Net profit FY10 4121.0 1290.4 1247.5 1146.5 FY11 3949.1 1289.6 1298.3 938.2

EPS (FY12E)............................................................................. Changed from | 6.7 to | 7.4 EPS (FY13E)............................................................................. Changed from | 7.4 to | 7.3 RATING...............................................................................................................Unchanged

PAT below estimates

Neyveli Lignite reported in line sales for Q3FY12. However, higher fuel costs QoQ despite a decline in generation led to lower EBITDA margin (21.8% vs. our estimate: 30%) and PAT in Q3FY12. While we like the regulated nature of its business (with no merchant power exposure); 1) sluggish capacity addition (coupled with delays) and 2) increased debtor days (using surplus cash to fund working capital requirement). We maintain our HOLD rating on the stock with a revised target price of | 94 due to a decline in WACC from 12% to 11.5%. Capacity addition of 500 MW in FY13 For FY12, we expect no capacity addition. For FY13, the capacity addition for the company stands at 500 MW. The 1000 MW Tuticorin expansion will be commissioned in FY14. The Barsingsar unit (250 MW) was operating at suboptimal PLF due to operational/technical issues with the turbine. In December 2011 and January 2012 both units commenced commercial production. Increase in debtor days a cause for worry The company sells ~100% output to Tamil Nadu SEB (loss of | 11353 crore in FY10). Accumulated debtors level till date is ~| 1600 crore from TNSEB. The management maintained that the company is receiving ~|100 crore every month from TNSEB. However, we believe that deterioration in the working capital cycle in the coming quarters will persist unless banks give short term lending or TNSEB is able to raise bonds.

Valuation summary
FY10 EPS (|) PE (x) Target PE (x) EV/EBITDA (x) P/BV (x) RoNW (%) RoCE (%) 7.4 12.9 12.6 11.9 1.6 12.1 11.4 FY11 7.7 12.4 12.1 12.2 1.4 11.6 12.2 FY12E 7.4 12.9 12.6 12.8 1.4 10.5 10.6 FY13E 7.3 13.1 12.8 10.4 1.3 9.8 10.6

Stock data
Market Capitalisation Debt (FY11) Cash (FY11) EV 52 week H/L Equity capital Face value MF Holding (%) FII Holding (%) | 16106 Crore | 4004 Crore | 4420 Crore | 15690 Crore |115/68 | 1678 Crore | 10 0.0 0.2

Price movement
6,100 5,900 5,700 5,500 5,300 5,100 4,900 4,700 4,500 Feb-11 May-11 Aug-11 Nov-11 Nifty (L.H.S) Price (R.H.S) 140 120 100 80 60 Feb-12

Valuation
At the CMP of | 96, the stock is trading at a P/E of 12.9x and 13.1x on FY12E and FY13E EPS, respectively. Similarly, on P/BV multiple, the stock is trading at 1.4x FY12E and 1.3x FY13E, book value. Delay in capacity additions and worsening finances of off taker (Tamil Nadu SEB) in spite of a proposed tariff hike of 40% restricts the future outperformance of the stock. We maintain our HOLD rating.
Exhibit 1: Financial Performance
(| Crore) Net Sales EBITDA EBITDA Margin (%) Depreciation Interest Reported PAT EPS (|) Q3FY12 1,046.0 227.5 21.8 91.0 28.3 184.9 1.1 Q2FY12E 1,063.7 319.1 30.0 90.0 26.1 212.1 1.3 Q3FY11 869.2 111.0 12.8 95.6 26.1 96.0 0.6 Q2FY12 1,158.8 343.8 29.7 90.1 29.9 245.1 1.5 QoQ (Chg %) -9.7 -33.8 897 bps 1.0 -5.2 -24.6 -24.6 YoY (Chg %) 20.3 104.9 -791 bps -4.8 8.5 92.6 92.6

Analysts name
Chirag Shah shah.chirag@icicisecurities.com Darshan Dodhia darshan.dodhia@icicisecurities.com

Source: Company , ICICIdirect.com Research

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Exhibit 2: Trend in quarterly generation

6,000 5,000 4,000 3,000
The company generated 4044 million units in Q3FY12 registering QoQ de-growth of 7.4% and YoY growth of 11%

4,593

4,747

5,149 4,326 3,644

4,804

15 4,367 4,044 10 5 0 -5 -10

2,000 1,000 0 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12

Million units (L H S)

YoY growth (%)

Source: CEA, ICICIdirect.com Research

Exhibit 3: Trends in quarterly PLF (%)

100 80 60 (%) 40 20 0 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 87.1 78.1 63.3 93.5 87.9 80.5 80.6

Source: ICICIdirect.com Research

Exhibit 4: Likely capacity addition in FY12-13

Project/ Unit Neyveli TPS - II Expansion Unit 1 Neyveli TPS - II Expansion Unit 2 Total Capacity Capacity (MW) 250 250 500 COD Apr-12 Aug-12

Source: CEA, ICICIdirect.com Research

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Exhibit 5: Revised earnings estimates

We have revised our FY12 estimates upwards by 11.3% and FY13 downwards by 4.3% mainly due to higher depreciation & interest cost and lower other income due to commissioning of 500 MW

| crore Sales EBITDA EBITDA (%) PAT

Previous 4529 1369 30.2 1120

FY12E estimates Revised 4408 1345 30.5 1247

% Change -2.7 -1.8 11.3

Previous 6192 1614 26.1 1287

FY13E estimates Revised % Change 5034 1810 36.0 1233 -4.2 -18.7 12.1

Source: ICICIdirect.com Research

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Financial summary
Profit and loss statement
(Year-end March) Total operating Income Growth (%) Inc./ (Dec) in stocks Employee Expenses Administrative Expenses Other expenses Total Operating Expenditure EBITDA Growth (%) Depreciation Interest Other Income PBT Others Total Tax PAT Growth (%) EPS (|) FY10 4,121.0 22.8 30.2 1,696.5 1,103.9 0.0 2,830.6 1,290.4 57.1 253.9 33.6 598.7 1,601.7 -3.2 357.4 1,247.5 30.3 7.4 FY11 3,949.1 -4.2 -6.6 1,400.8 1,265.3 0.0 2,659.5 1,289.6 -0.1 412.9 159.1 970.4 1,688.0 3.5 386.2 1,298.3 32.9 7.7 FY12E 4,407.9 11.6 113.3 1,712.1 1,237.5 0.0 3,063.0 1,344.9 4.3 503.0 182.7 957.7 1,616.9 0.0 369.9 1,247.0 28.3 7.4 (| Crore) FY13E 5,034.0 14.2 50.0 1,897.8 1,276.3 0.0 3,224.1 1,809.9 34.6 712.0 379.0 879.9 1,598.8 0.0 365.8 1,233.0 24.5 7.3

Cash flow statement

(Year-end March) Profit before Tax Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL and Provisions Others CF from operating activities (Inc)/dec in Investments (Inc)/dec in Fixed Assets Others CF from investing activities Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Inc/(dec) in Sec. premium Others CF from financing activities Net Cash flow Opening Cash Closing Cash FY10 1,601.7 253.9 -804.2 379.3 -891.7 538.9 311.2 -620.0 0.0 -308.8 0.0 19.7 -588.3 0.0 -290.0 -858.7 -628.6 5,452.2 4,823.6 FY11 1,688.0 412.9 -623.7 -509.7 -795.6 172.0 573.3 -530.9 0.0 42.3 0.0 -73.2 -196.1 0.0 -347.8 -617.1 -402.8 4,823.6 4,420.8 FY12E 1,616.9 503.0 -601.0 128.5 -977.3 670.0 458.6 -1,600.0 0.0 -1,141.4 0.0 1,120.0 -549.6 0.0 -503.0 67.4 -404.0 4,420.8 4,016.9 (| Crore) FY13E 1,598.8 712.0 -525.0 175.0 -1,094.6 866.1 366.9 -1,500.0 0.0 -1,133.1 0.0 1,050.0 -549.6 0.0 -712.0 -211.6 -478.7 4,016.9 3,538.2

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(Year-end March) Liabilities Equity Capital Reserve and Surplus Total Shareholders funds Total Debt Deferred Tax Liability Minority Interest / Others Total Liabilities Assets Gross Block Less: Acc Depreciation Net Block Capital WIP Total Fixed Assets Investments Inventory Debtors Loans and Advances Other Current Assets Cash Total Current Assets Creditors Provisions Other Liabilities Total Current Liabilities Net Current Assets Others Assets Application of Funds FY10 1,677.7 8,647.0 10,324.7 4,077.4 570.4 0.0 14,972.5 FY11 1,677.7 9,496.8 11,174.5 4,004.0 579.4 0.0 15,758.0 FY12E 1,677.7 10,178.9 11,856.6 5,124.0 579.4 0.0 17,560.1 (| Crore) FY13E 1,677.7 10,847.1 12,524.8 6,174.0 579.4 0.0 19,278.2

Key ratios
(Year-end March) Per share data (|) EPS Cash EPS BV DPS Cash Per Share Operating Ratios (%) EBITDA Margin PBT / Total Operating income PAT Margin Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio FY10 7.4 8.9 61.5 2.0 28.8 31.3 38.9 30.3 142.7 104.1 12.1 11.4 17.1 12.9 11.9 5.2 3.9 1.6 3.2 0.4 3.2 2.0 FY11 7.7 10.2 66.6 2.0 26.3 32.7 42.7 32.9 203.6 102.0 11.6 12.2 17.2 12.4 12.2 5.8 4.1 1.4 3.1 0.4 4.1 2.3 FY12E 7.4 10.4 70.7 2.8 23.9 30.5 36.7 28.3 220.0 102.0 10.5 10.6 13.9 12.9 12.8 5.4 3.7 1.4 3.8 0.4 3.7 1.9 FY13E 7.3 11.6 74.7 2.8 21.1 36.0 31.8 24.5 220.0 102.0 9.8 10.6 13.0 13.1 10.4 5.0 3.2 1.3 3.4 0.5 3.3 1.4

11,932.4 6,693.6 5,238.8 3,908.5 9,147.3 1,044.9 503.0 1,611.6 581.6 164.6 4,823.6 7,684.4 1,175.7 613.3 1,214.2 3,003.2 4,681.2 99.1 14,972.5

13,856.4 7,060.6 6,795.8 2,676.2 9,472.0 964.8 491.7 2,202.4 559.8 177.5 4,420.7 7,852.1 1,103.3 649.9 830.8 2,584.1 5,268.1 53.1 15,758.0

14,856.4 7,563.6 7,292.9 4,192.2 11,485.0 964.8 537.8 2,656.8 624.8 213.0 4,016.9 8,049.3 1,231.8 779.9 927.3 2,939.0 5,110.3 0.0 17,560.1

15,856.4 8,275.6 7,580.8 6,194.6 13,775.4 964.8 554.1 3,034.2 713.6 255.6 3,538.2 8,095.7 1,406.8 1,091.9 1,059.0 3,557.7 4,538.0 0.0 19,278.2

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

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ICICIdirect.com coverage universe (Power)

NTPC Idirect Code Mcap(| cr) Lanco Infratech Idirect Code Mcap(| cr) Neyveli Lignite Idirect Code Mcap(| cr) PTC Idirect Code Mcap(| cr) NHPC Idirect Code Mcap(| cr) JP Power Idirect Code Mcap(| cr) Tata Power Idirect Code Mcap(| cr) CESC Idirect Code Mcap(| cr) CESC 3515.4 CMP Target % Upside 279 302 8.2 FY11 FY12E FY13E 4942.5 5657.4 6665.7 22.1 31.4 32.8 12.6 8.9 8.5 8.5 7.8 8.8 1.0 0.9 0.9 5.9 8.0 7.9 7.4 8.0 7.4 JAIHYD 11817.0 TATPOW 26070.0 CMP Target % Upside CMP Target % Upside 45 50 11.1 110 96 -12.7 FY11 FY12E FY13E FY11 FY12E FY13E 736.9 1655.2 2727.2 19450.8 23953.3 27096.9 0.8 1.4 2.7 8.8 6.6 8.2 58.4 31.8 17.0 12.5 16.6 13.4 30.0 18.9 13.4 10.5 9.2 9.5 1.9 2.2 1.7 2.0 1.8 1.6 3.2 6.8 9.8 15.9 11.0 12.2 3.9 5.6 7.1 10.6 10.8 9.5 NHPC 27,061.6 CMP Target % Upside 22 28 27.3 FY11 FY12E FY13E 4225.3 5219.9 5950.8 1.8 1.8 2.1 12.5 11.9 10.2 13.6 13.3 12.0 1.1 1.0 1.0 8.8 8.7 9.5 6.7 7.6 8.1 POWTRA 1,619.8 CMP Target % Upside 55 62 12.7 FY11 FY12E FY13E 8,997.3 8,250.8 11,553.1 4.7 3.7 3.8 11.6 14.9 14.5 13.4 13.0 12.1 0.7 0.7 0.7 6.4 4.8 4.9 9.1 5.6 6.9 NEYLIG 16,106.0 CMP Target % Upside LANINF 3,816.8 CMP Target % Upside 16 17 6.3 185 96 94 (2.1) FY11 FY12E FY13E FY11 FY12E FY13E 7783.8 9734.7 10986.1 3949.1 4407.9 5034.0 1.9 1.0 1.3 7.7 7.4 7.3 8.6 16.0 11.9 12.4 12.9 13.1 10.1 8.3 7.8 12.2 12.8 10.4 0.8 0.8 0.8 1.4 1.4 1.3 12.7 6.3 7.1 11.6 10.5 9.8 6.8 5.6 5.7 12.2 10.6 10.6 NTPC 148,418.4 CMP Target % Upside 180 185 2.8 FY11 FY12E FY13E Sales (| cr) 58981.3 61187.2 64752.7 EPS (|) 10.7 10.9 11.2 PE (x) 16.8 16.5 16.0 EV/E (x) 10.7 13.5 12.8 PB (x) 2.2 2.0 1.9 RoNW (%) 13.0 12.3 11.7 RoCE (%) 12.5 10.5 10.2

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Exhibit 6: Recommendation History

156

132

108

84

60 Feb-11 Apr-11 May-11 Jul-11 Price Aug-11 Sep-11 Nov-11 Dec-11 Feb-12

Target Price

Source: ICICIdirect.com Research

Exhibit 7: Recent Releases

Date 8-Apr-11 31-May-11 5-Jul-11 1-Aug-11 5-Oct-11 11-Nov-11 6-Jan-12 Event Q4FY11 Preview Q4FY11 Result Update Q1 FY12 Preview Q1 FY12 Pesult update Q2 FY11 Preview Q2 FY12 Review Q3 FY12 Preview CMP 112 105 103 98 75 78 78 Target Price 103 110 110 104 104 92 92 Rating Reduce Hold Hold Hold Hold Hold Hold

Source: ICICIdirect.com Research

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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ANALYST CERTIFICATION
We /I, , Chirag Shah PGDBM and Darshan Dodhia MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

pankaj.pandey@icicisecurities.com

Disclosures:
ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and employees (ICICI Securities and affiliates) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. It is confirmed that Chirag Shah PGDBM and Darshan Dodhia MBA research analysts and the authors of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking and other business. ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. It is confirmed that Chirag Shah PGDBM and Darshan Dodhia MBA research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use of information contained in the report prior to the publication thereof. 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