Orient Green - Cash Flow Turnaround Story

Stock Opportunities Not-so-Hidden Gems
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ORIENT GREEN POWER COMPANY LTD
Market cap as on 05.02.2018 on BSE is 803 Crore

The company was incurring the huge losses in the past three four years. The Company came with IPO around 55 somewhere around 2010. The company has created 425 MW capacity in wind energy in 96 MW in the biomass power. Company was incurring huge losses in fast 3-4 years the stock price went down from the ipo price of 55 to Rs. 10.86 on 05.02.2018.

There were three reasons for the losses

  1. The losses from the biomass business
  2. Unavailability of grid in the Tamilnadu for evacuation of wind power. (Availability around 75%)
  3. High interest loans

Now the situation is currently as follows

  1. Company has sold all the loss making biomass power plants
  2. Grid availability in Tamilnadu has improved more the 95% in last six quarters.
  3. Higher interest loans taken for biomass business has been transferred and remaining loans have been restructured. There is still scope for improvement in the interest cost. For remaining details please see the investor presentation

The company has reported the financials for the Q3 2018 on 25.01.2018. In 9 months the company has generated the cash profit from wind business of Rs. 132 crores (94 crores depreciation + 38 crores of profit before tax) (Refer page 18 of Investor presentation)

Now the almost all the biomass assets are sold company will be only left with the wind business.
Company will report the following estimated cash flow from the wind business in FY 18
Rs 152 cr (Rs 132 crores for 9 months and 20 crores assumed for quarter 4)

Company can report the following cash flow from wind business in 2019
Rs 152 cr + 20 crore assumed in interest saving which looks easily feasible 2% on 1000 crore + 25 crores assumed from the newly commissioned wind energy capacity which will go live in April 2018
So total comes to around 197 core

So 197 crore cash flow on market cap of 803 cr, which looks cheaper to me.

There are some other positives which can be found in the investor presentation and con call scripts.

Risks
Grid Unavailability in Tamilnadu

Disclosure Invested around 2% of My net-worth in the stock around 10.50
Con call details
Investor Presentation

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