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Delays in capacity addition continue…
Neyveli Lignite (NLC) reported its Q3FY11 result below our expectations.
The topline came in at | 869 crore (our estimate: | 900 crore). The
company reported PAT of | 96 crore (our estimate: Rs 207 crore). On the
volume front, NLC has delivered de-growth of ~3.5% YoY to 3,644 MU
(3777 MU in Q3FY10). The realisation stood at | 2.34/Kwh. The company
reported EBITDA of | 111 crore (margin of 12%) down sharply YoY and
QoQ due to higher other expenditure.
ƒ Incessant rains drag bottomline
The company sold 3,644 MUs – a volume de-growth of 3.5% YoY
and 16.53% QoQ. During the quarter, there were incessant rains,
which affected production of lignite. Hence, there was a resultant
decline in sales and higher other expenditure leading to a decline in
EBITDA and profitability.
ƒ Delay in capacity addition warrants revising earnings downwards
The Barsinger Unit 2 (125 MW) is facing technical problem, which is
being solved in one of the units. The company expects to
commission it by March 2011. Hence, the impact of profits will be
felt in Q1FY12. Also, the 500 MW power plant that was originally to
be commissioned by August 2011 will be commissioned by
December 2011. Hence, we have revised downwards our FY11E
and FY12E earnings estimate by 17.6% and 24%, respectively.
Valuation
At the CMP of | 110, the stock is trading at FY11E P/BV of 1.6x and FY12E
P/BV of 1.5x. Due to a delay in capacity addition and downgrade in
earnings estimates, we have arrived at a fair value of | 103 based on our
DCF-based model. Taking the WACC of 10.34% and assuming a terminal
growth of 3.5%, our fair value per share is | 103. We are changing our
rating on the stock from SELL to REDUCE.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Delays in capacity addition continue…
Neyveli Lignite (NLC) reported its Q3FY11 result below our expectations.
The topline came in at | 869 crore (our estimate: | 900 crore). The
company reported PAT of | 96 crore (our estimate: Rs 207 crore). On the
volume front, NLC has delivered de-growth of ~3.5% YoY to 3,644 MU
(3777 MU in Q3FY10). The realisation stood at | 2.34/Kwh. The company
reported EBITDA of | 111 crore (margin of 12%) down sharply YoY and
QoQ due to higher other expenditure.
ƒ Incessant rains drag bottomline
The company sold 3,644 MUs – a volume de-growth of 3.5% YoY
and 16.53% QoQ. During the quarter, there were incessant rains,
which affected production of lignite. Hence, there was a resultant
decline in sales and higher other expenditure leading to a decline in
EBITDA and profitability.
ƒ Delay in capacity addition warrants revising earnings downwards
The Barsinger Unit 2 (125 MW) is facing technical problem, which is
being solved in one of the units. The company expects to
commission it by March 2011. Hence, the impact of profits will be
felt in Q1FY12. Also, the 500 MW power plant that was originally to
be commissioned by August 2011 will be commissioned by
December 2011. Hence, we have revised downwards our FY11E
and FY12E earnings estimate by 17.6% and 24%, respectively.
Valuation
At the CMP of | 110, the stock is trading at FY11E P/BV of 1.6x and FY12E
P/BV of 1.5x. Due to a delay in capacity addition and downgrade in
earnings estimates, we have arrived at a fair value of | 103 based on our
DCF-based model. Taking the WACC of 10.34% and assuming a terminal
growth of 3.5%, our fair value per share is | 103. We are changing our
rating on the stock from SELL to REDUCE.
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