Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco Infratech (LAIN.BO) Rs38.50
Equity Research
First Take: Merchant rates and domestic coal availability key
News
Lanco Infratech reported 3QFY11 recurring PAT of Rs1.1bn (vs reported
PAT of Rs1.6bn), 8% below our estimate of Rs1.2bn and 33% below Reuters
consensus estimate of Rs1.6bn primarily due to 1) Lower than expected
merchant realizations – Rs3.7/kwh (Rs3.5/kwh for Kondapalli II and
Rs4.1/kwh for Amarkantak vs Rs4.90/Rs3.80/kWh in 2QFY11); 2) decline in
Kondapalli II PLF due to maintenance shutdown. The weaker results in the
power segment were partially offset by stronger EPC revenues (+50% qoq)
and improvement of 540 bps in EBIT margin.
Lanco reverted to straight line depreciation of 5.2% from the accelerated
depreciation policy of 15% as they now view the merchant rates not to be
as strong in FY12E as they anticipated earlier. Lanco indicated that they
have tied up 70% of capacity under bilateral mechanism at various rates
ranging between 4.3-5.0/kwh for the next 2-3 months and remaining 30%
will be sold under UI and exchange mechanism. We believe Lanco will add
about 1800MW over the next 6-8 months (1200MW of Anpara, and 600MW
of Udupi) taking the total installed capacity to about 3800MW.
Analysis
We believe near term risks to Lanco’s operating cash flows such as 1)
declining merchant rates; 2) increase in interest rates; 3) rising fuel costs
due to shortage of domestic coal, will likely get magnified due to high
leverage. Currently Lanco has net debt of about US$3.9bn (net debt/equity
of 3.8x) and still needs funding for 1) 4000MW of projects in pipeline; and
2) Griffin coal mine. In the event of shortfall of internal accruals, then we
estimate Lanco to raise further equity leading to equity dilution.
Implications
The stock is down 17% today concerning these risks, in our view. Our
earnings estimates, target price and rating are under review pending
further details.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco Infratech (LAIN.BO) Rs38.50
Equity Research
First Take: Merchant rates and domestic coal availability key
News
Lanco Infratech reported 3QFY11 recurring PAT of Rs1.1bn (vs reported
PAT of Rs1.6bn), 8% below our estimate of Rs1.2bn and 33% below Reuters
consensus estimate of Rs1.6bn primarily due to 1) Lower than expected
merchant realizations – Rs3.7/kwh (Rs3.5/kwh for Kondapalli II and
Rs4.1/kwh for Amarkantak vs Rs4.90/Rs3.80/kWh in 2QFY11); 2) decline in
Kondapalli II PLF due to maintenance shutdown. The weaker results in the
power segment were partially offset by stronger EPC revenues (+50% qoq)
and improvement of 540 bps in EBIT margin.
Lanco reverted to straight line depreciation of 5.2% from the accelerated
depreciation policy of 15% as they now view the merchant rates not to be
as strong in FY12E as they anticipated earlier. Lanco indicated that they
have tied up 70% of capacity under bilateral mechanism at various rates
ranging between 4.3-5.0/kwh for the next 2-3 months and remaining 30%
will be sold under UI and exchange mechanism. We believe Lanco will add
about 1800MW over the next 6-8 months (1200MW of Anpara, and 600MW
of Udupi) taking the total installed capacity to about 3800MW.
Analysis
We believe near term risks to Lanco’s operating cash flows such as 1)
declining merchant rates; 2) increase in interest rates; 3) rising fuel costs
due to shortage of domestic coal, will likely get magnified due to high
leverage. Currently Lanco has net debt of about US$3.9bn (net debt/equity
of 3.8x) and still needs funding for 1) 4000MW of projects in pipeline; and
2) Griffin coal mine. In the event of shortfall of internal accruals, then we
estimate Lanco to raise further equity leading to equity dilution.
Implications
The stock is down 17% today concerning these risks, in our view. Our
earnings estimates, target price and rating are under review pending
further details.
No comments:
Post a Comment