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Adani Power Ltd.
Focus on coal @ Adani at India Conference
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„Adani Power: an unregulated and focused IPP; Buy
1) Adani Power (APL) highlighted focus scale up its capacity 4.7x to 9.24GW by
FY14E vs 1.98GW in FY11E via an unregulated business model (no cap on
RoE).
2) 77% presold capacity (7.14GW of 9.24GW) at healthy pre-sales tariffs,
secured fuel/funding, location advantage and business model – front-loaded
merchant power with assured shift to PPAs.
These competitive advantages and 77% presold capacity at healthy pre-sales
tariffs at ~Rs2.9/kWh make APL one of the top EBITDA margin (58% in FY13E)
and RoE (23%) earner in our IPP universe.
More projects – 15.9GW, PPAs and risk mitigation since IPO
„ Synchronized India’s first 660MW supercritical unit at Mundra in Dec’10.
Capacity at 1.98GW vs 660MW in FY10
„ Added more projects under pipeline - 15.9GW vs 9.9GW at its IPO (July09)
by adding 3.3GW Mundra V, 1.32GW Tiroda III, 1.32GW Chhindwara and
660MW Dahej. Work on all these sites should start in next one year.
Risks: Clients remain worried on: execution, delivery of coal by Coal india in-line
with linkage letter, imported coal – exposes it to country, currency & freight risks,
and fall in power rates on lower power deficit.
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.
Focus on coal @ Adani at India Conference
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„Adani Power: an unregulated and focused IPP; Buy
1) Adani Power (APL) highlighted focus scale up its capacity 4.7x to 9.24GW by
FY14E vs 1.98GW in FY11E via an unregulated business model (no cap on
RoE).
2) 77% presold capacity (7.14GW of 9.24GW) at healthy pre-sales tariffs,
secured fuel/funding, location advantage and business model – front-loaded
merchant power with assured shift to PPAs.
These competitive advantages and 77% presold capacity at healthy pre-sales
tariffs at ~Rs2.9/kWh make APL one of the top EBITDA margin (58% in FY13E)
and RoE (23%) earner in our IPP universe.
More projects – 15.9GW, PPAs and risk mitigation since IPO
„ Synchronized India’s first 660MW supercritical unit at Mundra in Dec’10.
Capacity at 1.98GW vs 660MW in FY10
„ Added more projects under pipeline - 15.9GW vs 9.9GW at its IPO (July09)
by adding 3.3GW Mundra V, 1.32GW Tiroda III, 1.32GW Chhindwara and
660MW Dahej. Work on all these sites should start in next one year.
Risks: Clients remain worried on: execution, delivery of coal by Coal india in-line
with linkage letter, imported coal – exposes it to country, currency & freight risks,
and fall in power rates on lower power deficit.
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.
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