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UBS Investment Research
Key Call: Lanco Infratech
3Q FY11: Recurring PAT up 59% YoY
3Q FY11: Deprecation policy changed to Straight line method
In 3Q FY11, Lanco’s net sales declined 3% YoY to Rs15.62bn primarily due to
lower power trading revenues. EBITDA increased 57% YoY to Rs4.8bn due to
lower raw material costs. Reported PAT was up 54% YoY to Rs1.64bn. However,
adjusted for forex gain (Rs140m), recurring PAT was up 59% YoY to Rs1.5bn.
The company has also changed its deprecation policy to Straight line from WDV.
9M FY11 numbers are more relevant in our view
Due to the change in depreciation policy, the 3Q numbers have been impacted in
the form of a) negative depreciation, b) higher other income, and c) higher tax. We
think this makes 9M numbers much more appropriate to look at. In 9M FY11,
recurring PAT of Rs3.7bn is up 17% YoY. The results are below expectations as
merchant tariff realisations have not improved significantly over 2Q FY11.
Conference call on Feb 8, 2011 at 10am IST
We believe that the reported numbers have been significantly impacted due to
elimination of revenues/PAT for internal projects. The EPC and construction
business order book stand at Rs275bn. In the previous quarter, the company was
also awarded the EPC order of Moser Baer’s 1,200 MW Power Project. We expect
to get more details on this and other latest developments at the company during the
conference call (at 10am IST on 8th Feb 2011).
Valuation: Maintain Buy rating and price target of Rs105
Our price target of Lanco (UBS Asia Key Call) is derived on SoTP basis. We value
Lanco as a conglomerate with power contributing 55% of valuation and EPC 37%.
3Q FY11: Consolidated results
In 3Q FY11, Lanco’s net sales declined 3% YoY to Rs15.62bn primarily due to
lower power trading revenues. EBITDA increased 57% YoY to Rs4.8bn due to
lower raw material costs. Reported PAT was up 54% YoY to Rs1.64bn.
However, adjusted for forex gain (Rs140m), recurring PAT was up 59% YoY to
Rs1.5bn. The company has changed its deprecation policy to Straight line from
WDV.
Lanco Infratech
Lanco Infratech Limited (Lanco), established in 1993, is an integrated
infrastructure developer with interests in power, infrastructure, construction and
real estate. Lanco is among the leading private sector power generation
companies. It has a captive construction division that directly benefits from the
award of in-house power, real estate and infrastructure projects.
Statement of Risk
We believe the key risks for the power business are: fuel availability and
linkages, execution and operation of power plants, and payment security for
merchant power. Key risks for the real estate business include India’s interest
rate outlook, recession in property prices, escalation in construction costs, a
potential slowdown in IT spending, and regulatory and legal risks. The
construction business and infrastructure development streams may suffer due to
execution and order inflows, policy risk, and commodity price increases,
especially in cement and steel.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Key Call: Lanco Infratech
3Q FY11: Recurring PAT up 59% YoY
3Q FY11: Deprecation policy changed to Straight line method
In 3Q FY11, Lanco’s net sales declined 3% YoY to Rs15.62bn primarily due to
lower power trading revenues. EBITDA increased 57% YoY to Rs4.8bn due to
lower raw material costs. Reported PAT was up 54% YoY to Rs1.64bn. However,
adjusted for forex gain (Rs140m), recurring PAT was up 59% YoY to Rs1.5bn.
The company has also changed its deprecation policy to Straight line from WDV.
9M FY11 numbers are more relevant in our view
Due to the change in depreciation policy, the 3Q numbers have been impacted in
the form of a) negative depreciation, b) higher other income, and c) higher tax. We
think this makes 9M numbers much more appropriate to look at. In 9M FY11,
recurring PAT of Rs3.7bn is up 17% YoY. The results are below expectations as
merchant tariff realisations have not improved significantly over 2Q FY11.
Conference call on Feb 8, 2011 at 10am IST
We believe that the reported numbers have been significantly impacted due to
elimination of revenues/PAT for internal projects. The EPC and construction
business order book stand at Rs275bn. In the previous quarter, the company was
also awarded the EPC order of Moser Baer’s 1,200 MW Power Project. We expect
to get more details on this and other latest developments at the company during the
conference call (at 10am IST on 8th Feb 2011).
Valuation: Maintain Buy rating and price target of Rs105
Our price target of Lanco (UBS Asia Key Call) is derived on SoTP basis. We value
Lanco as a conglomerate with power contributing 55% of valuation and EPC 37%.
3Q FY11: Consolidated results
In 3Q FY11, Lanco’s net sales declined 3% YoY to Rs15.62bn primarily due to
lower power trading revenues. EBITDA increased 57% YoY to Rs4.8bn due to
lower raw material costs. Reported PAT was up 54% YoY to Rs1.64bn.
However, adjusted for forex gain (Rs140m), recurring PAT was up 59% YoY to
Rs1.5bn. The company has changed its deprecation policy to Straight line from
WDV.
Lanco Infratech
Lanco Infratech Limited (Lanco), established in 1993, is an integrated
infrastructure developer with interests in power, infrastructure, construction and
real estate. Lanco is among the leading private sector power generation
companies. It has a captive construction division that directly benefits from the
award of in-house power, real estate and infrastructure projects.
Statement of Risk
We believe the key risks for the power business are: fuel availability and
linkages, execution and operation of power plants, and payment security for
merchant power. Key risks for the real estate business include India’s interest
rate outlook, recession in property prices, escalation in construction costs, a
potential slowdown in IT spending, and regulatory and legal risks. The
construction business and infrastructure development streams may suffer due to
execution and order inflows, policy risk, and commodity price increases,
especially in cement and steel.
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