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Adani Enterprises Ltd Neutral
ADEL.BO, ADE IN
Dec-q consolidated EBITDA in-line, PAT below estimates
• Dec-q reported EBITDA of Rs.9.4B (up 30% QoQ) was in-line with
estimates, but the performance of constituents was mixed. MPSEZ and
Adani Power constitute ~62% of EBITDA and have reported results earlier.
MPSEZ had reported healthy EBITDA of Rs3.1B (5.1% ahead of est.),
while Adani Power (EBITDA of Rs2.7B, ~9.5% below est.) had
disappointed on account of lower merchant sales and custom duties. (Click
link to view result updates on MPSEZ and Adani Power). The remaining
businesses of Adani Enterprises have reported strong EBITDA of Rs3.57B
in Dec-q (up 47% QoQ, calculated by difference), slightly ahead of
estimate.
• Dec-q PAT of Rs4.74, down 7% QoQ, was well below estimate. Even
after accounting for PAT already reported by MPSEZ and Adani Power, the
QoQ profit decline came as a disappointment. We note that interest has
increased by 71% QoQ to Rs2.28B, and is the primary reason for lower
PAT. Ex-power and ports, the increase in implied interest cost for remaining
businesses is quite high (Rs1.62B up 104% QoQ), though no large asset has
got commissioned. Consolidated D/E ratio increased to 1.62x at the end of
Dec-q vs. 1.43x at the end of Sep-q.
• Coal trading volumes dip but margins improved: Contrary to our
expectation of an uptick in coal trading volume in a post-monsoon quarter,
AEL reported volume of 6.4MT, down 5.5% QoQ. However, weak volume
was more than compensated by healthy increase in margins to 12.4% vs.
1HFY11 tracking at 9.6%. Segment EBITDA of Rs3.3B was up by a
healthy 23% QoQ.
• Downside to FY11 estimate, post disappointment in Dec-q. We expect to
get more clarity on high interest cost during the Dec-q from management
before revising estimate. We maintain Neutral and Mar-12 price target of
Rs665. Downside risks to PT: Delay in development of domestic coal
blocks, slowdown in traffic at port, and execution in Adani Power (and viceversa
for upside risks to price target). We recommend switching to Adani
Power (OW), or to MPSEZ (N) on declines.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Enterprises Ltd Neutral
ADEL.BO, ADE IN
Dec-q consolidated EBITDA in-line, PAT below estimates
• Dec-q reported EBITDA of Rs.9.4B (up 30% QoQ) was in-line with
estimates, but the performance of constituents was mixed. MPSEZ and
Adani Power constitute ~62% of EBITDA and have reported results earlier.
MPSEZ had reported healthy EBITDA of Rs3.1B (5.1% ahead of est.),
while Adani Power (EBITDA of Rs2.7B, ~9.5% below est.) had
disappointed on account of lower merchant sales and custom duties. (Click
link to view result updates on MPSEZ and Adani Power). The remaining
businesses of Adani Enterprises have reported strong EBITDA of Rs3.57B
in Dec-q (up 47% QoQ, calculated by difference), slightly ahead of
estimate.
• Dec-q PAT of Rs4.74, down 7% QoQ, was well below estimate. Even
after accounting for PAT already reported by MPSEZ and Adani Power, the
QoQ profit decline came as a disappointment. We note that interest has
increased by 71% QoQ to Rs2.28B, and is the primary reason for lower
PAT. Ex-power and ports, the increase in implied interest cost for remaining
businesses is quite high (Rs1.62B up 104% QoQ), though no large asset has
got commissioned. Consolidated D/E ratio increased to 1.62x at the end of
Dec-q vs. 1.43x at the end of Sep-q.
• Coal trading volumes dip but margins improved: Contrary to our
expectation of an uptick in coal trading volume in a post-monsoon quarter,
AEL reported volume of 6.4MT, down 5.5% QoQ. However, weak volume
was more than compensated by healthy increase in margins to 12.4% vs.
1HFY11 tracking at 9.6%. Segment EBITDA of Rs3.3B was up by a
healthy 23% QoQ.
• Downside to FY11 estimate, post disappointment in Dec-q. We expect to
get more clarity on high interest cost during the Dec-q from management
before revising estimate. We maintain Neutral and Mar-12 price target of
Rs665. Downside risks to PT: Delay in development of domestic coal
blocks, slowdown in traffic at port, and execution in Adani Power (and viceversa
for upside risks to price target). We recommend switching to Adani
Power (OW), or to MPSEZ (N) on declines.
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