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Jaiprakash Power Ventures Ltd------------------------------------------------ Maintain NEUTRAL
In-line 4Q11, planned equity issuance a key trigger for the stock
● JPVL’s 4Q11 operating results were in-line with our estimates.
However, recurring PAT was 4% lower than our expectations on
account of slightly higher-than-expected interest expenses.
● Generation at 219mu during 4Q11 declined 17% YoY. However,
during FY11, JPVL’s 300MW Baspa-II hydro project recorded the
highest generation at about 1.5bu (up 13% YoY).
● Shareholders and creditors of JPVL and its subsidiaries, JKHCL
and BPSCL, at the court convened meeting, have approved the
amalgamation of these subsidiaries, effective April 2010.
● Last week, JPVL synchronised the first unit (of 250MW) of its 1GW
Karcham Wangtoo hydro power project. JPVL believes its PPA with
PTC for the sale of 0.8GW power from this project is now void and
expects to sell the entire output on merchant basis in the near term.
This could provide an upside potential to our FY12 EPS.
● However, JPVL’s balance sheet is highly geared and would require
equity issuance during FY12. Our sensitivity analysis suggests
planned equity issuance should be earnings accretive and would
improve visibility on the company’s ability to execute large projects.
Figure 1: JPVL – quarterly generation from operating projects
In mn kwh 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11
Baspa (300 MW) 96 423 712 243 96
Vishnuprayag (400 MW) 167 607 866 428 122
Total generation 263 1,029 1,578 671 219
Source: CEA.
4Q11 operating results in-line
JPVL’s 300MW Baspa-II hydro project recorded the highest ever
generation at about 1.5bu (up 13% YoY) during FY11, since its
commencement in 2003. However, generation at 219mn kwh from its
700MW operating capacity (300MW Baspa and 400MW Vishnuprayag
projects) during 4Q11 declined 17% YoY. JPVL’s 4Q11 operating
results were in-line with our estimates. Recurring PAT at Rs116 mn
declined 81% YoY affected from interest expense on debt taken to
finance equity investments of its subsidiaries executing power projects.
Recurring PAT was 4% lower than our estimates, led by slightly
higher-than-expected interest expenses. We cut our FY11 earnings by
1% to incorporate this lower-than-expected 4Q results.
Figure 2: JPVL – 4Q11 standalone results summary
(Rs mn) 4QFY10 4QFY11 % YoY 4QFY11E % difference
Generation (mn kWh) 263 219 -17.0% 219 0%
Net Sales 1,411 1,415 0.3% 1,425 -1%
Operating expenses (328) (250) -23.9% (255) -2%
EBITDA 1,083 1,165 7.6% 1,170 0%
EBITDA margin (%) 76.8% 82.4% 561 82.1% 2610%
Depreciation (235) (234) -0.2% (240) -2%
EBIT 848 931 9.8% 930 0%
Net interest expenses (115) (787) 586.0% (779) 1%
PBT 734 145 -80.3% 151 -4%
Tax (125) (29) -77.0% (30) -4%
Tax Rate (%) 17.0% 19.9% 19.9%
Recurring PAT 609 116 -81.0% 121 -4%
Exceptionals (3) 54 0
Reported PAT 606 169 -72.0% 121 40%
Source: Company data, Credit Suisse estimates
Power capacity 3x within a year; commissioning pre-poned
JPVL plans to commission its 1GW (4 units of 250MW each) Karcham
Wangtoo hydro power project by 2Q FY12 in phases, about 3–4
months ahead of its schedule/our estimates and its 0.5GW Bina-I
coal-based project during CY11. This would more than triple its power
capacity to 2.2GW within a year (from 0.7GW currently). Early
commissioning of Karcham Wangtoo project would allow JPVL to
capture high profits earned by hydro projects during the monsoon
season (July-Sept). Also, as per JPVL, its agreement to sell 0.8GW
power from the project to PTC is now void. The company expects to
sell the entire output from the project on merchant basis in the near
term. This could provide an upside potential to our earnings estimate
for FY12.
Planned equity issuance would be earnings accretive and
improve visibility on planned projects
JPVL has a strong pipeline of coal and hydro power projects under
execution. However, one of the key concerns in its ability to execute
these projects is its high gearing. JPVL believes that it is adequately
funded in the near term, after which funding needs would be
supported by cash flows from the commissioning of the Karcham
Wangtoo and Bina-I projects.
However, we believe it would have to raise equity by FY12. JPVL has
already announced its plans to raise US$500 mn. Our sensitivity
analysis suggests that planned equity issuance should be earnings
accretive, as it would reduce interest expense from debt taken
currently to meet the equity needs of its subsidiary projects. Besides,
this should provide visibility on the company’s ability to execute large
projects. We see planned equity issuance as a key trigger for the
stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jaiprakash Power Ventures Ltd------------------------------------------------ Maintain NEUTRAL
In-line 4Q11, planned equity issuance a key trigger for the stock
● JPVL’s 4Q11 operating results were in-line with our estimates.
However, recurring PAT was 4% lower than our expectations on
account of slightly higher-than-expected interest expenses.
● Generation at 219mu during 4Q11 declined 17% YoY. However,
during FY11, JPVL’s 300MW Baspa-II hydro project recorded the
highest generation at about 1.5bu (up 13% YoY).
● Shareholders and creditors of JPVL and its subsidiaries, JKHCL
and BPSCL, at the court convened meeting, have approved the
amalgamation of these subsidiaries, effective April 2010.
● Last week, JPVL synchronised the first unit (of 250MW) of its 1GW
Karcham Wangtoo hydro power project. JPVL believes its PPA with
PTC for the sale of 0.8GW power from this project is now void and
expects to sell the entire output on merchant basis in the near term.
This could provide an upside potential to our FY12 EPS.
● However, JPVL’s balance sheet is highly geared and would require
equity issuance during FY12. Our sensitivity analysis suggests
planned equity issuance should be earnings accretive and would
improve visibility on the company’s ability to execute large projects.
Figure 1: JPVL – quarterly generation from operating projects
In mn kwh 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11
Baspa (300 MW) 96 423 712 243 96
Vishnuprayag (400 MW) 167 607 866 428 122
Total generation 263 1,029 1,578 671 219
Source: CEA.
4Q11 operating results in-line
JPVL’s 300MW Baspa-II hydro project recorded the highest ever
generation at about 1.5bu (up 13% YoY) during FY11, since its
commencement in 2003. However, generation at 219mn kwh from its
700MW operating capacity (300MW Baspa and 400MW Vishnuprayag
projects) during 4Q11 declined 17% YoY. JPVL’s 4Q11 operating
results were in-line with our estimates. Recurring PAT at Rs116 mn
declined 81% YoY affected from interest expense on debt taken to
finance equity investments of its subsidiaries executing power projects.
Recurring PAT was 4% lower than our estimates, led by slightly
higher-than-expected interest expenses. We cut our FY11 earnings by
1% to incorporate this lower-than-expected 4Q results.
Figure 2: JPVL – 4Q11 standalone results summary
(Rs mn) 4QFY10 4QFY11 % YoY 4QFY11E % difference
Generation (mn kWh) 263 219 -17.0% 219 0%
Net Sales 1,411 1,415 0.3% 1,425 -1%
Operating expenses (328) (250) -23.9% (255) -2%
EBITDA 1,083 1,165 7.6% 1,170 0%
EBITDA margin (%) 76.8% 82.4% 561 82.1% 2610%
Depreciation (235) (234) -0.2% (240) -2%
EBIT 848 931 9.8% 930 0%
Net interest expenses (115) (787) 586.0% (779) 1%
PBT 734 145 -80.3% 151 -4%
Tax (125) (29) -77.0% (30) -4%
Tax Rate (%) 17.0% 19.9% 19.9%
Recurring PAT 609 116 -81.0% 121 -4%
Exceptionals (3) 54 0
Reported PAT 606 169 -72.0% 121 40%
Source: Company data, Credit Suisse estimates
Power capacity 3x within a year; commissioning pre-poned
JPVL plans to commission its 1GW (4 units of 250MW each) Karcham
Wangtoo hydro power project by 2Q FY12 in phases, about 3–4
months ahead of its schedule/our estimates and its 0.5GW Bina-I
coal-based project during CY11. This would more than triple its power
capacity to 2.2GW within a year (from 0.7GW currently). Early
commissioning of Karcham Wangtoo project would allow JPVL to
capture high profits earned by hydro projects during the monsoon
season (July-Sept). Also, as per JPVL, its agreement to sell 0.8GW
power from the project to PTC is now void. The company expects to
sell the entire output from the project on merchant basis in the near
term. This could provide an upside potential to our earnings estimate
for FY12.
Planned equity issuance would be earnings accretive and
improve visibility on planned projects
JPVL has a strong pipeline of coal and hydro power projects under
execution. However, one of the key concerns in its ability to execute
these projects is its high gearing. JPVL believes that it is adequately
funded in the near term, after which funding needs would be
supported by cash flows from the commissioning of the Karcham
Wangtoo and Bina-I projects.
However, we believe it would have to raise equity by FY12. JPVL has
already announced its plans to raise US$500 mn. Our sensitivity
analysis suggests that planned equity issuance should be earnings
accretive, as it would reduce interest expense from debt taken
currently to meet the equity needs of its subsidiary projects. Besides,
this should provide visibility on the company’s ability to execute large
projects. We see planned equity issuance as a key trigger for the
stock.
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