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Adani Power (ADAN.BO)
Buy Equity Research
Below expectations on high deferred taxes and lower output
What surprised us
Adani Power (APL) reported 3QFY11 PAT of Rs1.3bn (after adjusting for
customs duty) vs our estimate of Rs1.5bn and Bloomberg consensus of
Rs1.9bn, primarily due to high deferred taxes (effective tax rate for 3QFY11
is 37.9% vs 14.3% qoq) on account of additional depreciation which leads
to deferred tax liabilities; and 2) lower output. The plant load factor for
3QFY11 was about 85 % (vs 82% yoy) despite plant availability factor of
95% as APL has lost generation due to low demand in Gujarat. Merchant
sales were 10% of total sales and realizations were Rs3.9/kwh (2.76/kwh
under PPA), in line with our expectations. Fuel cost for 3QFY11 was about
Rs1.04/kwh (12% lower qoq) which implies delivered cost of US$45/ton, in
line with management guidance.
We believe commissioning of Mundra Phase III (1320MW) over the next six
months and Mundra Phase IV and Tiroda Phase 1 will be the key re-rating
triggers for the stock.
What to do with the stock
We re-iterate Buy on APL with 12m TP of Rs167 implying potential upside
of 36%. We believe Adani Power is best positioned to withstand the
competition compared with its peers primarily due to 1) low off take risk –
70% of its capacity is tied up on long term PPA mechanism; 2) low fuel risk
as APL is backward integrated in terms of fuel supplies; 3) higher plant
availability; and 4) lower payment risk. We reduce our EPS estimates by
6.8% for FY11E due to lower output and fine tune FY12E/13E EPS
estimates. Delays in commissioning of capacities is the key risk
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Power (ADAN.BO)
Buy Equity Research
Below expectations on high deferred taxes and lower output
What surprised us
Adani Power (APL) reported 3QFY11 PAT of Rs1.3bn (after adjusting for
customs duty) vs our estimate of Rs1.5bn and Bloomberg consensus of
Rs1.9bn, primarily due to high deferred taxes (effective tax rate for 3QFY11
is 37.9% vs 14.3% qoq) on account of additional depreciation which leads
to deferred tax liabilities; and 2) lower output. The plant load factor for
3QFY11 was about 85 % (vs 82% yoy) despite plant availability factor of
95% as APL has lost generation due to low demand in Gujarat. Merchant
sales were 10% of total sales and realizations were Rs3.9/kwh (2.76/kwh
under PPA), in line with our expectations. Fuel cost for 3QFY11 was about
Rs1.04/kwh (12% lower qoq) which implies delivered cost of US$45/ton, in
line with management guidance.
We believe commissioning of Mundra Phase III (1320MW) over the next six
months and Mundra Phase IV and Tiroda Phase 1 will be the key re-rating
triggers for the stock.
What to do with the stock
We re-iterate Buy on APL with 12m TP of Rs167 implying potential upside
of 36%. We believe Adani Power is best positioned to withstand the
competition compared with its peers primarily due to 1) low off take risk –
70% of its capacity is tied up on long term PPA mechanism; 2) low fuel risk
as APL is backward integrated in terms of fuel supplies; 3) higher plant
availability; and 4) lower payment risk. We reduce our EPS estimates by
6.8% for FY11E due to lower output and fine tune FY12E/13E EPS
estimates. Delays in commissioning of capacities is the key risk
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