Adani Enterprises - Reported PAT boosted by high other income - UBS

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UBS Investment Research
Adani Enterprises
Reported PAT boosted by high other income

􀂄 Reported PAT in-line due to forex adjustment gain of ~Rs1.2bn
Q2 revenues increased 2.1% y/y to Rs57.6bn (the low increase is due to
discontinuation of many non-coal trading businesses). Operating profit of Rs7.3bn
(+38% y/y, UBS-e Rs9.1bn) and pre-ex PAT of Rs4.4bn (+65% y/y, UBS-e
Rs5.5bn) was lower than our estimates, led by lower-than-expected margins in the
coal trading and agri businesses. Q2 interest costs at Rs1.3bn was lower than our
estimate of Rs1.7bn. Reported PAT of Rs5.6bn, was higher due to forex
adjustment gain of Rs1.2bn for FCCBs.
􀂄 Coal trading volumes robust at 6.8mt, up 38% y/y
H1FY11 coal trading volumes have increased 19% y/y to 15mt (UBS-e 33mt in
FY11). Excluding gain from FCCBs conversion from the coal trading business,
EBITDA margins would be ~6% in our estimate (8% in H1, our FY11 assumption
is 9.5%). Agri business reported Q2 margins of 1.2% (our FY11 estimate is 5%).
􀂄 AEL wins MDO contract for 40mtpa Chendipada coal block
AEL has been selected as a mine developer and operator (MDO) for the
Chendipada coal block in Orissa, with peak mining of 40mtpa. AEL is also
required to set up a 2,000MW power plant for utilising coal washery rejects in JV
with the client (AEL will have 89% stake). AEL now has total coal mining
contracts of 110mtpa in India.
􀂄 Valuation: Neutral Rating
Our price target comprises: 1) port: 33%; 2) power: 32%, 3) mining: 13%; 4)
trading: 10%; 5) real estate: 4%; 6) agri: 2%; 7) others: 1% and 8) cash: 5%.