When should you buy stocks of Reliance Power?

Reliance Power stock has corrected very sharply in recent stock market crash and is quoting at it's lifetime low too. But still the odds for the stock are not positive yet. A stock trading firm has recommended to reduce the stock in it's recent stock research report.

Reliance Power has been downgraded to ‘reduce’ and the target stock price is reduced to Rs.69. All ADAG group stock have been hit badly in market crash and Reliance Power is no exception.

Some of the valid reasons the stock has been beaten down are

  1. The company could not make much progress in the execution of certain projects and hence no value could be assigned to them. For example, krishnapatnam and Chitrangi power projects totaling 7.92 GW have been excluded from the stock valuation as there is no visibility in their execution timeline.
  2. Other projects such as Sumatra Coal mines and CBM blocks have also been excluded from valuation as these projects are at its nascent stages of development.
  3. The company has also to overcome challenges of coal supplies for 1.2 GW coal based power plants to be completed by December 2012.

The outlook on the stock may turn positive only when the company could report remarkable progress in project execution.Confidence may be back if the company could complete its tight scheduled 2400 MW Samalkot gas based power project in time (by December 2012) and operates it profitably.

When should you buy stocks of Reliance Power?
If the stock trades below Rs.70 price levels, it could be a good stock to buy for long term portfolio looking at the big size projects and being "power sector" player which is essential infrastructure element for future of India.