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Adani Power Ltd. - 3Q PBT miss on capex delay & lower ASP
„3Q PBT miss on plant delays & lower merchant prices; Buy
APL 3Q Rec. PBT Rs1.9bn, +106%YoY (-11% BofAMLe) on 4% lower ASP vs
BofAMLe and 1 month delay in commissioning of 4th 330MW unit of Chinese plant. We
cut our FY11 PBT by 28% to factor in weak 3Q and one more month of delay in the start
of first 660MW unit supplied by Harbin/Dongfang. We maintain our PO at Rs153 on roll
forward despite 41-23% cut in FY11-12E EPS led by hike in deferred (non-cash) taxes,
which has no impact on DCF. Buy on (1) a 4.7x scale-up in capacity by FY14E via an
unregulated business model (no cap on RoE), and (2) visibility of 4.4x EPS over FY11-
13E led by 77% power pre-sold at remunerative tariff, secured fuel/funding, location
advantage & business model – front-loaded merchant power with assured shift to PPAs.
Rec PAT +65% despite 251% higher tax; PLF ok @ 85%
APL 3Q Rec PAT Rs1.2bn, +65%YoY (-35% BofAMLe) despite PBT +106%YoY as the
company has provided non-cash deferred tax on accounting for 20% additional
depreciation available in 1st year of the start of new power plant to extend its tax breaks.
Rep. PAT Rs1.1bn, +51%YoY on Rs155mn of custom duty on sale of power from SEZ
to Domestic Tariff Area (DTA) to GUVNL, which is likely to be recovered once approved
by GERC as change of law. Average - PAF was 95% vs 93% in 2QFY11 and PLF 85%
vs 82%. Its gross generation was +29%QoQ and fuel costs -12%QoQ to Rs1.04/kWh
on stabilization of 3rd 330MW plant, driving EBITDA margin @ 57% (53% in 2Q).
Competitive advantages - coal, location and visible growth
APL has secured low-cost fuel via coal linkages (38% of capacity) and contracts with
its parent (23%). It has 86% of capacity located in the Western region – highest peak
power deficit (17.7%) vs India (13.3%) in FY10. These competitive advantages and
healthy pre-sales tariffs at ~Rs2.9 (see Table 2) make APL the top margin (58% in
FY13E) and RoE (23%) earner in our IPP universe on our estimates.
More projects – 15.9GW, PPAs and risk mitigation since IPO
APL is likely to acquire balance 26% stake in its Tiroda TPP through a stock swap. Its
project pipeline is now 15.9GW vs 9.9GW at its IPO (July09). APL derisked its coal
mix by securing domestic coal linkages (38% of fuel mix).
Price objective basis & risk
Adani Power Ltd. (XADPF)
Our PO of Rs153 is based on a sum-of-the-parts valuation. We have valued the
Parent capacity of 4620MW Mundra project at Rs66 per share based on DCF.
We have valued the 74% stake in 3300MW Tiroda project at Rs77 per share on
DCF basis. The 100% stake in 1320MW Kawai project is valued at Rs10 per
share on DCF basis. The overall cost of capital assumed is 13.7%. Risks: Project
execution, financing, imported coal exposes it to potential country, currency and
freight risks, Chinese labour, denial of SEZ benefits, Infra bottleneck and fall in
power rates on potential match of demand-supply of power in India.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Power Ltd. - 3Q PBT miss on capex delay & lower ASP
„3Q PBT miss on plant delays & lower merchant prices; Buy
APL 3Q Rec. PBT Rs1.9bn, +106%YoY (-11% BofAMLe) on 4% lower ASP vs
BofAMLe and 1 month delay in commissioning of 4th 330MW unit of Chinese plant. We
cut our FY11 PBT by 28% to factor in weak 3Q and one more month of delay in the start
of first 660MW unit supplied by Harbin/Dongfang. We maintain our PO at Rs153 on roll
forward despite 41-23% cut in FY11-12E EPS led by hike in deferred (non-cash) taxes,
which has no impact on DCF. Buy on (1) a 4.7x scale-up in capacity by FY14E via an
unregulated business model (no cap on RoE), and (2) visibility of 4.4x EPS over FY11-
13E led by 77% power pre-sold at remunerative tariff, secured fuel/funding, location
advantage & business model – front-loaded merchant power with assured shift to PPAs.
Rec PAT +65% despite 251% higher tax; PLF ok @ 85%
APL 3Q Rec PAT Rs1.2bn, +65%YoY (-35% BofAMLe) despite PBT +106%YoY as the
company has provided non-cash deferred tax on accounting for 20% additional
depreciation available in 1st year of the start of new power plant to extend its tax breaks.
Rep. PAT Rs1.1bn, +51%YoY on Rs155mn of custom duty on sale of power from SEZ
to Domestic Tariff Area (DTA) to GUVNL, which is likely to be recovered once approved
by GERC as change of law. Average - PAF was 95% vs 93% in 2QFY11 and PLF 85%
vs 82%. Its gross generation was +29%QoQ and fuel costs -12%QoQ to Rs1.04/kWh
on stabilization of 3rd 330MW plant, driving EBITDA margin @ 57% (53% in 2Q).
Competitive advantages - coal, location and visible growth
APL has secured low-cost fuel via coal linkages (38% of capacity) and contracts with
its parent (23%). It has 86% of capacity located in the Western region – highest peak
power deficit (17.7%) vs India (13.3%) in FY10. These competitive advantages and
healthy pre-sales tariffs at ~Rs2.9 (see Table 2) make APL the top margin (58% in
FY13E) and RoE (23%) earner in our IPP universe on our estimates.
More projects – 15.9GW, PPAs and risk mitigation since IPO
APL is likely to acquire balance 26% stake in its Tiroda TPP through a stock swap. Its
project pipeline is now 15.9GW vs 9.9GW at its IPO (July09). APL derisked its coal
mix by securing domestic coal linkages (38% of fuel mix).
Price objective basis & risk
Adani Power Ltd. (XADPF)
Our PO of Rs153 is based on a sum-of-the-parts valuation. We have valued the
Parent capacity of 4620MW Mundra project at Rs66 per share based on DCF.
We have valued the 74% stake in 3300MW Tiroda project at Rs77 per share on
DCF basis. The 100% stake in 1320MW Kawai project is valued at Rs10 per
share on DCF basis. The overall cost of capital assumed is 13.7%. Risks: Project
execution, financing, imported coal exposes it to potential country, currency and
freight risks, Chinese labour, denial of SEZ benefits, Infra bottleneck and fall in
power rates on potential match of demand-supply of power in India.
No Understanding............:(
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