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Tata Power
Overweight; TTPW.BO, TPWR IN
Business as usual in Dec-q, coal mine margin improvement a potential stock catalyst, maintain OW
• Dec-q results in line: Consol PAT of Rs4.4B was up 24% qoq and 378%
YoY: the sharp YoY jump was on account of stripping cost-related
accounting adjustments in the base quarter. On the other hand, at the EBIT
level, we saw a 7.3% dip QoQ — this is largely on account of: a) back
down in Mumbai generation assets, and b) absence of regulatory incentives
at Delhi distribution business.
• Power business followed industry trend, suffered lower utilization and
merchant prices: Mumbai EBIT of Rs2B in Dec-q was down 7% QoQ and
16% YoY. There was fixed cost under-recovery in Trombay Unit-6
(500MW), as generation from this oil-based machine (and hence expensive)
had to be backed down. Merchant sales from 200MW capacity were up 28%
QoQ, however, average realization was ~Rs3.7, quite similar to Sep-q level.
• NDPL update: QoQ EBITDA was down 31% to Rs959MM. The results
were weaker as the company did not book any AT&C loss reduction
incentives during the quarter vs. Rs550MM incentive in Sep-q. According
to mgmt, the company has already met the loss reduction target for FY11E.
• Coal mine volume meets co guidance, but margins have not yet begun
to improve: Coal mine sales volume was down 6.1% YoY to 16MMT in
Dec-q, though 17% higher than rain-hit Sep-q volume. The company has
exactly met guidance of 60MTPA sale in CY10. Dec-q realizations were
US$75/MT (up 42% YoY) and EBIT ~US$19/MT. On the whole, EBIT per
ton has improved YoY (up 57%), though slightly below 1HFY11 rate of
US$20/MT. As new contracts are signed at current prices, we believe there
is upside to coal price realizations. Management has guided for 7-10%
volume growth for CY11E.
• Project update: (a) Mundra UMPP: Overall project progress is 71% (65%
at end of Sep-q) and unit-I (800MW) CoD is running as per schedule (Sep-
11, in line with est.). (b) Maithon: 92% complete (90% at end of Sep-q),
unit-I of 525MW is now expected to be synchronized on coal in Mar-11 and
Unit-II in Jul-10. According to management, the rail siding would be ready
only by Dec-11 and till then they would rely on coal transportation by road
using trucks. Other projects: Land acquisition is ongoing.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power
Overweight; TTPW.BO, TPWR IN
Business as usual in Dec-q, coal mine margin improvement a potential stock catalyst, maintain OW
• Dec-q results in line: Consol PAT of Rs4.4B was up 24% qoq and 378%
YoY: the sharp YoY jump was on account of stripping cost-related
accounting adjustments in the base quarter. On the other hand, at the EBIT
level, we saw a 7.3% dip QoQ — this is largely on account of: a) back
down in Mumbai generation assets, and b) absence of regulatory incentives
at Delhi distribution business.
• Power business followed industry trend, suffered lower utilization and
merchant prices: Mumbai EBIT of Rs2B in Dec-q was down 7% QoQ and
16% YoY. There was fixed cost under-recovery in Trombay Unit-6
(500MW), as generation from this oil-based machine (and hence expensive)
had to be backed down. Merchant sales from 200MW capacity were up 28%
QoQ, however, average realization was ~Rs3.7, quite similar to Sep-q level.
• NDPL update: QoQ EBITDA was down 31% to Rs959MM. The results
were weaker as the company did not book any AT&C loss reduction
incentives during the quarter vs. Rs550MM incentive in Sep-q. According
to mgmt, the company has already met the loss reduction target for FY11E.
• Coal mine volume meets co guidance, but margins have not yet begun
to improve: Coal mine sales volume was down 6.1% YoY to 16MMT in
Dec-q, though 17% higher than rain-hit Sep-q volume. The company has
exactly met guidance of 60MTPA sale in CY10. Dec-q realizations were
US$75/MT (up 42% YoY) and EBIT ~US$19/MT. On the whole, EBIT per
ton has improved YoY (up 57%), though slightly below 1HFY11 rate of
US$20/MT. As new contracts are signed at current prices, we believe there
is upside to coal price realizations. Management has guided for 7-10%
volume growth for CY11E.
• Project update: (a) Mundra UMPP: Overall project progress is 71% (65%
at end of Sep-q) and unit-I (800MW) CoD is running as per schedule (Sep-
11, in line with est.). (b) Maithon: 92% complete (90% at end of Sep-q),
unit-I of 525MW is now expected to be synchronized on coal in Mar-11 and
Unit-II in Jul-10. According to management, the rail siding would be ready
only by Dec-11 and till then they would rely on coal transportation by road
using trucks. Other projects: Land acquisition is ongoing.
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