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India Power and Infrastructure
3QFY11 earnings preview and PLF tracker
• Earnings to recover post a depressed 2Q. Lanco, TPWR and NTPC,
to recover in the quarter coming off a low base: 1) Lanco, +146%qoq:
Recovery in construction revenue and improved PLF at Udupi. 2)
TPWR, +24% qoq pick up coal volumes low in 2Q because of
monsoons. 3) NTPC, +16% qoq but -13% yoy: Commissioning on
new capacity, fixed cost under recovery in 2Q.
• Momentum to continue for the Adani Group: 1) Adani Power,
+30%qoq: Impact of 990MW operational at Mundra operational for
the full quarter 3) Mundra Port, +5.7% qoq: Steady growth in traffic,
don’t expect one offs in 2Q to recur 2) Adani Enterprises, +21.5% qoq:
Uptick in earnings contribution from Adani Power and Mundra Port,
recovery in coal trading volume post monsoon
• Low PLFs and capital costs resulting in a weak 2Q for some: 1)
JSW: higher fuel cost risk and low PLF at Barmer; 2) RPWR: Low
PLF at Rosa (600MW) persists, other income driving PAT 3) GMR:
Loss making quarter on completion of Delhi airport 4) GVK: Lower
PLF at Gautami and some one-off maintenance expenses.
• Merchant price estimate. We model merchant rate of ~Rs4-5/unit this
quarter with Adani (2Q rate: Rs4.9/unit), JSW (2Q rate of ~Rs.4.6/unit)
and Lanco (2Q rate of ~Rs.4/unit) having maximum exposure.
• PGCIL: Expect healthy PAT growth of 21% YoY in Dec-q. Capex
and capitalization rate for 9MFY11 are key focus points, in our view.
• Stock views: Adani Power (OW) is our top pick in the IPP space. We
remain cautious on JSW (N) on account of execution issues and
escalation in fuel costs. Defensives, Powergrid (OW) and NTPC (N)
present a good entry point at current valuations. GMR (OW) and GVK
(OW) are our top infrastructure conglomerate picks. We await fresh
growth catalysts/8-10% correction to buy MPSEZ (N)
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