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Ta t a Power
Win defence deal + Dutch &
Jojobera power plants update
„Finally a success in defence; 120MW Jojobera start; Neutral
TPC defence E&C has tested success after a long development cycle with Rs11bn order.
We have raised our parent EPS by 2-3% (consol. EPS +1.5%) over FY12-13E to factor in
higher parent E&C revenue. Its JV IEL started 120MW (4% capacity) unit 5 at Jojobera.
Raise PO to Rs1450 (1430) to factor in higher parent value of Rs333 (323) and IEL value
of Rs21 at 1.5x 1-yr fwd P/BV. Maintain non-consensus Neutral led by limited stock
upside, flat RoE and premium valuations - FY12E P/BV of 2.2x vs sector (1.8x).
Rs11bn order to mordernise Airfield along Sino-India border
TPC SED division won its largest defence order of Rs11bn for Modernisation of Airfield
Infrastructure phase I (MAFI-I) at 30 airbases from Ministry of Defence (MoD) beating
Selex, Italy. Key takeaways: 1) It should add 1.6-1.7x to parent E&C revenue over FY12-
13E, 2) Option to win another ~Rs10bn order under the contract for MAFI phase - II for
another 28 airbases and 3) the largest ever defence contract won by an Indian private co.,
a step towards India’s first ever Defence Production Policy unveiled in Jan’11 preferring
domestic entities and encouraging private participation.
Start of 120MW unit 5 at Jojobera; scale-up complete
In Mar’ 2011, IEL a 74:26 JV of TPC & Tata Steel, has commissioned last of 120MWs
unit 5 at Jojobera adding ~4% to group capacity. The unit will supply power to Tata Steel
Jamshedpur plant. Further, IEL is in the process of acquiring 900-1200 acres of land at
Tiruldih, Jharkhand to set up 1.98GW power plant in two phases, as part IPP and part
captive power plant for Tata Steel.
Rs32bn captive power plant @ Corus appoint consultant
TPC, in 50:50 JV with Tata Steel, to set up a 350MW (3% of equity a/c capacity) power
plant near Amsterdam with a capex of ~Rs32bn (Euro500mn) which can be expanded to
500MW. Plant will utilise waste gases from Corus’ IJmuiden steel plants and will supply
power in return. The design engineering work has been awarded to Fluor and the EPC
phase to start by end-'11. The plant is likely start in 2015. We are yet to value this plant
waiting for details on returns, which may be below its core India IPP business.
Price objective basis & risk
Tata Pwr. Co. (XTAWF)
Our PO of Rs1450 for Tata Power is based SOTP valuation. IPP business is
valued at Rs525 per share. The parent business is valued at Rs333 per share on
DCF basis at CoE of 13.5pct, 100% stake in Mundra UMPP at Rs123 per share
on DCF at cost of equity of 14.6pct, 74% stake in Maithon JV is valued at Rs48
per share on DCF basis at CoE of 13.4pct and 74% stake IEL captive power plant
is valued at 1.5x 1-year forward P/BV . Its Telecom investments have been
valued at Rs224 per share at current market BofAML PO / deal valuations. Power
related investments valued at Rs648 per share on DCF (Indonesian coal mines)
or P/BV (NDPL, Powerlinkes) or PE (Tata BP Solar) based methods. Other
Investments are valued at Rs51 per share. Risks: project execution challenges,
mismatch in imported coal price hike for Mundra project vs. rise in the coal index,
availability of low price fuel for merchant power projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ta t a Power
Win defence deal + Dutch &
Jojobera power plants update
„Finally a success in defence; 120MW Jojobera start; Neutral
TPC defence E&C has tested success after a long development cycle with Rs11bn order.
We have raised our parent EPS by 2-3% (consol. EPS +1.5%) over FY12-13E to factor in
higher parent E&C revenue. Its JV IEL started 120MW (4% capacity) unit 5 at Jojobera.
Raise PO to Rs1450 (1430) to factor in higher parent value of Rs333 (323) and IEL value
of Rs21 at 1.5x 1-yr fwd P/BV. Maintain non-consensus Neutral led by limited stock
upside, flat RoE and premium valuations - FY12E P/BV of 2.2x vs sector (1.8x).
Rs11bn order to mordernise Airfield along Sino-India border
TPC SED division won its largest defence order of Rs11bn for Modernisation of Airfield
Infrastructure phase I (MAFI-I) at 30 airbases from Ministry of Defence (MoD) beating
Selex, Italy. Key takeaways: 1) It should add 1.6-1.7x to parent E&C revenue over FY12-
13E, 2) Option to win another ~Rs10bn order under the contract for MAFI phase - II for
another 28 airbases and 3) the largest ever defence contract won by an Indian private co.,
a step towards India’s first ever Defence Production Policy unveiled in Jan’11 preferring
domestic entities and encouraging private participation.
Start of 120MW unit 5 at Jojobera; scale-up complete
In Mar’ 2011, IEL a 74:26 JV of TPC & Tata Steel, has commissioned last of 120MWs
unit 5 at Jojobera adding ~4% to group capacity. The unit will supply power to Tata Steel
Jamshedpur plant. Further, IEL is in the process of acquiring 900-1200 acres of land at
Tiruldih, Jharkhand to set up 1.98GW power plant in two phases, as part IPP and part
captive power plant for Tata Steel.
Rs32bn captive power plant @ Corus appoint consultant
TPC, in 50:50 JV with Tata Steel, to set up a 350MW (3% of equity a/c capacity) power
plant near Amsterdam with a capex of ~Rs32bn (Euro500mn) which can be expanded to
500MW. Plant will utilise waste gases from Corus’ IJmuiden steel plants and will supply
power in return. The design engineering work has been awarded to Fluor and the EPC
phase to start by end-'11. The plant is likely start in 2015. We are yet to value this plant
waiting for details on returns, which may be below its core India IPP business.
Price objective basis & risk
Tata Pwr. Co. (XTAWF)
Our PO of Rs1450 for Tata Power is based SOTP valuation. IPP business is
valued at Rs525 per share. The parent business is valued at Rs333 per share on
DCF basis at CoE of 13.5pct, 100% stake in Mundra UMPP at Rs123 per share
on DCF at cost of equity of 14.6pct, 74% stake in Maithon JV is valued at Rs48
per share on DCF basis at CoE of 13.4pct and 74% stake IEL captive power plant
is valued at 1.5x 1-year forward P/BV . Its Telecom investments have been
valued at Rs224 per share at current market BofAML PO / deal valuations. Power
related investments valued at Rs648 per share on DCF (Indonesian coal mines)
or P/BV (NDPL, Powerlinkes) or PE (Tata BP Solar) based methods. Other
Investments are valued at Rs51 per share. Risks: project execution challenges,
mismatch in imported coal price hike for Mundra project vs. rise in the coal index,
availability of low price fuel for merchant power projects.
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