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Tata Power
Projects on track
3Q results were lower than our expectations due to a mix of lower coal
production and merchant tariff. New projects coming on line and a ramp-up in
coal business should help growth over the next few years. Projects are on
schedule and we expect the Mumbai licensee area to be steady. Hold.
3Q11 numbers below our estimate due to lower coal production and merchant tariff
Tata Power reported consolidated revenues of Rs44.4bn (up 2.3% yoy) for 3Q11, below our
estimates due to lower revenues from trading operations and lower merchant realisation.
EBITDA for the quarter was reported at Rs9.8bn (up 7.2% yoy). Reported profit for the
quarter came in at Rs4.6bn, while adjusted PAT came in Rs3.9bn, flat yoy, below our
estimates due to higher cash cost and lower-than-estimated coal production in Indonesian
mines and lower merchant realisation. In 4Q we expect coal production to rise and an
improvement in merchant realisation.
Capacity addition on track; coal business key to consolidated earnings
The company has c5,300MW of capacity under construction, including Maithon (1,050MW),
Mundra (4,000MW) and IEL unit 5 (120MW). The company has commissioned IEL unit 5
during the current year and we expect it to be fully operational by March 2011. The Maithon
plant is 92% completed and we expect the first unit to be commissioned by end-FY11.
Mundra is progressing as per schedule and we expect the first unit to be commissioned by
December 2011. CY10 coal production in Indonesian mines stood at 60m tonnes. We expect
production to ramp up and realisation to improve over CY2011-12, and believe this to be key
for consolidated earnings growth going forward.
Reducing target price, Maintain Hold
Tata Power has several power projects that we expect to become operational over the next
couple of years. In addition, we expect the expansion of mining capacity in Bumi to boost
earnings. But lower merchant realisation and increase cash cost in coal mines may dampen
earnings. We reduce our sales forecast for FY11F on account of lower trading revenues, but
this has a negligible effect on our EPS estimate. We increase our cost of equity assumptions
for projects on account of a higher risk-free rate, which reduces our SOTP-based target price
to Rs1,325 (from Rs1,400). The stock is currently trading at 1.9x FY12F book value.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power
Projects on track
3Q results were lower than our expectations due to a mix of lower coal
production and merchant tariff. New projects coming on line and a ramp-up in
coal business should help growth over the next few years. Projects are on
schedule and we expect the Mumbai licensee area to be steady. Hold.
3Q11 numbers below our estimate due to lower coal production and merchant tariff
Tata Power reported consolidated revenues of Rs44.4bn (up 2.3% yoy) for 3Q11, below our
estimates due to lower revenues from trading operations and lower merchant realisation.
EBITDA for the quarter was reported at Rs9.8bn (up 7.2% yoy). Reported profit for the
quarter came in at Rs4.6bn, while adjusted PAT came in Rs3.9bn, flat yoy, below our
estimates due to higher cash cost and lower-than-estimated coal production in Indonesian
mines and lower merchant realisation. In 4Q we expect coal production to rise and an
improvement in merchant realisation.
Capacity addition on track; coal business key to consolidated earnings
The company has c5,300MW of capacity under construction, including Maithon (1,050MW),
Mundra (4,000MW) and IEL unit 5 (120MW). The company has commissioned IEL unit 5
during the current year and we expect it to be fully operational by March 2011. The Maithon
plant is 92% completed and we expect the first unit to be commissioned by end-FY11.
Mundra is progressing as per schedule and we expect the first unit to be commissioned by
December 2011. CY10 coal production in Indonesian mines stood at 60m tonnes. We expect
production to ramp up and realisation to improve over CY2011-12, and believe this to be key
for consolidated earnings growth going forward.
Reducing target price, Maintain Hold
Tata Power has several power projects that we expect to become operational over the next
couple of years. In addition, we expect the expansion of mining capacity in Bumi to boost
earnings. But lower merchant realisation and increase cash cost in coal mines may dampen
earnings. We reduce our sales forecast for FY11F on account of lower trading revenues, but
this has a negligible effect on our EPS estimate. We increase our cost of equity assumptions
for projects on account of a higher risk-free rate, which reduces our SOTP-based target price
to Rs1,325 (from Rs1,400). The stock is currently trading at 1.9x FY12F book value.
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