SHARES in India-focused power and energy firm Essar Energy jumped almost four per cent yesterday after Credit Suisse analysts described it as an “unrivalled growth proposition”.
Essar shares rose 3.97 per cent to 529.2p in morning trading after the bank, which assumed coverage on its stock, set a 600p target price and rated it “outperform”. The stock closed up 3.5 per cent at 517p.
Credit Suisse analysts led by Ritesh Gaggar said Essar, which operates both oil and gas assets, was well positioned to benefit from massive growth in the Indian power market.
“We believe Essar offers investors a strong growth profile, with free cash flow looking set to expand materially to a sustained $3bn per annum from 2015,” they said.
“Its strategy ties in well with the outlook for the Indian power market, which is in structural deficit. The potential for future power demand growth in India is significant”.
The analysts believe Essar, a holding company for $8bn of energy assets, is undervalued compared with other Indian utilities and will benefit significantly from its growth strategy.
Essar has struggled to maintain its share price in recent months despite making progress on the construction and overhaul of its refineries and power stations. Its shares peaked at 589.5p in December but have since slipped back. Essar was spun out of Indian conglomerate Essar Group in a £1.3bn London share sale last April.