Adani Power --Solid 4Q11…keep them units comin’ :: Macquarie Research

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Adani Power
Solid 4Q11…keep them units comin’
Event
 NPAT was in line with our estimates while EBITDA steamed ahead, 36%
higher due to volume growth, better operating performance, realisations and
costs. The focus for Adani Power in FY12 will be on rolling out another
2,640MW at Mundra and dispatching large untied volumes into the power
market. In a challenging sector, the stock remains our preferred pick among
Indian IPPs, trading at a 22% discount to our price target and 8x FY13 NPAT.

Impact
 Solid result with volume delivered and costs contained: while net sales
volume increased 60% to 2,729GWhs qoq due to the commissioning of the
660MW Unit 5 at Mundra, EBITDA went up 90% due to:
1. Higher PLF (from 85% in 3Q11 to 89% in 4Q11)
2. Lower auxiliary power use (from 11% to 9%)
3. UI sales revenue (adding Rs.232m to revenues)
4. Declining operating costs (from Rs1.04/kWh to Rs.0.95/kWh), and;
5. Higher merchant realisations (Rs.4.50/kWh for 4Q11).
 Execution story continues, 1,980MW to 4,620MW in FY12: having
successfully commissioned 1,320MW at Mundra in FY11, Adani Power
anticipates 4,620MW of capacity on-line at Mundra by the end of FY12. We
are slightly more cautious, estimating 3,960MW at Mundra by FY12 end and
another 660MW at Tiroda.
Earnings and target price revision
 No change.
Price catalyst
 12-month price target: Rs134.00 based on a PER methodology.
 Catalyst: ongoing synchonising of supercritical units during 1H12
Action and recommendation
 Outperform, with the stock remaining our preferred IPP in the Indian power
space due to lower fuel costs, strategic position of Mundra, highly probable
volume growth and trading on reasonable FY13 NPAT multiple of 8x.