Tata Power- Ultra mega
Growth in regulated equity base and new power projects to
contribute to overall EBIT growth of 24% over FY11-13
New projects Mundra (first UMPP) and Maithon will help capacity
triple to 8.2GW by FY14
Coal margin expected to decline but not a major negative
Reiterate OW and raise TP to INR1,565 from INR1,525
Investment Summary
We believe Tata Power’s business can be divided
into three major segments, all of which in our
opinion have different drivers and growth
trajectory. We discuss each of them below.
Standalone business to witness steady
growth; margins may come under pressure
The first segment is the standalone business of Tata
Power (c37% of the group revenues), which includes
the original generation business (current capacity of
c3.1 GW), the transmission business and the
Mumbai distribution business. We believe that the
growth outlook for this business remains robust in
the medium term supported by the expected equity
infusion of cINR4.5bn over FY11-13e. In addition,
we believe that growth in the distribution business
and the currently 200 MW merchant power business
may surprise on the upside, particularly in FY11 and
FY12. However, in spite of robust growth, we
believe EBITDA margins may come under pressure
in the near term, driven largely by increasing fuel
costs and rising outlay on short-term power
procurement in lieu of growing demand. This should
offset the tax benefits under the 80IA tax regime,
leading to stable PAT margins of c11-12% over the
next three years
No comments:
Post a Comment