ADANI ENTERPRISES Coal powered :: Edelweiss

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􀂃 Adjusted Q2FY11 PAT in line with estimates
Adani Enterprises’ (AEL) Q2FY11 consolidated earnings catapulted ~244% Y-o-Y
to INR 5.1 bn against our estimate of INR 3.8 bn (excl. Mundra Port ~INR 1.4 bn
PAT). Though trading income posted lower volumes and margins, the impact was
mitigated by higher other income and marginally higher power earnings. The
company traded 6.7 mt of coal against earlier estimate of 9.0 mt with in line
EBITDA margin of ~9%. AEL incurred marginal loss in agro commodities .
􀂃 990 MW Mundra I operational, contributing ~INR 1.5 bn to earnings
The third unit at Mundra I & II (330 MW) was commercialised in August 2010,
resulting in total 990 MW projects earning INR 1.5 bn in Q2FY11. Adani Power
reported PAT of INR 1.3 bn after deferred tax of ~INR 210 mn. The fourth unit is
expected to be operational in Q3FY11 and phase III comprising 2x660 units is
expected to be commercialised in FY12.
􀂃 Secured additional coal mining concession in India
AEL has recently been appointed as a mine operator to develop the Chendipada
coal block in Orissa (1.6 bt reserves, annual mining target of 40 mt) and also
2GW power plant. The company will own 89% stake and the balance will be held
by a consortium consisting of three state government entities from Uttar
Pradesh, Chattisgarh, and Maharashtra. It has been assigned coal blocks Parsa
Kente and Machhakata (1.62 bt reserves) on BOT basis over the next 25 years
(starting FY12). As AEL is yet to bag environment and forest clearances for these
mines, we have not considered the ~INR 122/share in our SOTP.
􀂃 Incorporated Mundra Port in financials
Pursuant to the recent merger of Mundra Port with AEL, which resulted in MPSEZ
becoming a subsidiary, the consolidated earnings incorporating MPSEZ financials
is restated to INR 21.6 bn and INR 51 bn for FY11E and FY12E respectively.
􀂃 Outlook and valuations: Back-ended asset play; maintain ‘HOLD’
Our SOTP value of INR 484/share factors in the trading business, port and power
assets, but excludes coal mining (both in India and abroad) business. We believe
the current valuation factors in domestic mining as well as further scale up /
pipeline projects in its power, port and mining businesses, details of which are
not yet in public domain. At CMP of INR 684 since the stock factors in most of
the upsides hence, we maintain ‘HOLD/SU’ recommendation/rating.