Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco Infratech (LAIN.BO)
Buy Equity Research
Risks to fixed cost recovery from Anpara is low; reiterate CL-Buy
What's changed
Lanco Infratech (Lanco) synchronized Unit 1 of Anpara during the last week of
March 2011 and is on track for the synchronization of Unit 2 this quarter.
Anpara, (domestic coal based plant located in Uttar Pradesh) is about 24% of
the total installed capacity that Lanco will have by FY12E. The key concern on
this project is the availability of fuel and whether Lanco will recover its fixed
costs in the event of shortage of domestic coal supply.
Implications
Our discussions with the Uttar Pradesh Board officials and regulators indicate
that Lanco will be paid fixed costs based on availability of domestic coal and
they have yet to work out the agreement for plant availability for use of
imported coal in the event of a shortfall in domestic fuel supplies.
We believe there is limited uncertainty on Anpara’s ability to recover fixed
charges as 1) the analysis of merit order dispatch schedule for FY10
indicates that 25% of power consumed by UP discoms is from capacities
having variable cost above Rs2.5/unit. Our calculations indicate that
variable costs of power from Anpara on imported coal will be Rs2.4/kwh,
which is still attractive for UP discoms; 2) the regulator has recently
allowed Reliance Power operated Rosa plant in UP to use imported coal
upon giving 7 days notice to UP discoms. We believe a similar
arrangement could also be made applicable for Lanco Infratech.
Anpara constitutes ~15% of FY12E EPS and we believe an agreement with UP
discoms on imported fuel could provide more visibility on earnings from
Anpara. Lanco trades at 26%/35% discount on FY12E P/E & P/B to its peers
Valuation
We reiterate our Buy (on Conv List) on Lanco and maintain our 12-month
SOTP-based target price of Rs 54, implying 30% potential upside.
Key risks
Decline in short-term rates and higher fuel costs are key risks.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
Coverage View: Cautious
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco Infratech (LAIN.BO)
Buy Equity Research
Risks to fixed cost recovery from Anpara is low; reiterate CL-Buy
What's changed
Lanco Infratech (Lanco) synchronized Unit 1 of Anpara during the last week of
March 2011 and is on track for the synchronization of Unit 2 this quarter.
Anpara, (domestic coal based plant located in Uttar Pradesh) is about 24% of
the total installed capacity that Lanco will have by FY12E. The key concern on
this project is the availability of fuel and whether Lanco will recover its fixed
costs in the event of shortage of domestic coal supply.
Implications
Our discussions with the Uttar Pradesh Board officials and regulators indicate
that Lanco will be paid fixed costs based on availability of domestic coal and
they have yet to work out the agreement for plant availability for use of
imported coal in the event of a shortfall in domestic fuel supplies.
We believe there is limited uncertainty on Anpara’s ability to recover fixed
charges as 1) the analysis of merit order dispatch schedule for FY10
indicates that 25% of power consumed by UP discoms is from capacities
having variable cost above Rs2.5/unit. Our calculations indicate that
variable costs of power from Anpara on imported coal will be Rs2.4/kwh,
which is still attractive for UP discoms; 2) the regulator has recently
allowed Reliance Power operated Rosa plant in UP to use imported coal
upon giving 7 days notice to UP discoms. We believe a similar
arrangement could also be made applicable for Lanco Infratech.
Anpara constitutes ~15% of FY12E EPS and we believe an agreement with UP
discoms on imported fuel could provide more visibility on earnings from
Anpara. Lanco trades at 26%/35% discount on FY12E P/E & P/B to its peers
Valuation
We reiterate our Buy (on Conv List) on Lanco and maintain our 12-month
SOTP-based target price of Rs 54, implying 30% potential upside.
Key risks
Decline in short-term rates and higher fuel costs are key risks.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
Coverage View: Cautious
No comments:
Post a Comment