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Tata Power Company (TTPW.BO)
Buy Equity Research
In line with expectations: Execution to gain momentum in FY12E
What surprised us
Tata Power (TTPW) reported FY11 PAT of Rs20.6bn, in line with GS
estimate and marginally higher than Bloomberg consensus estimate of
Rs19.6bn. The higher realizations at Bumi for 4QFY11 of US$87.6/ton vs.
US$73/ton in 3QFY11 and US$62.7/ton in 4QFY10 was offset by lower
production of 58mt vs. our estimate of 62mt. Merchant realizations were
Rs5/kwh for the Trombay unit 8 and Rs3.45/kwh for the Haldia unit.
Management indicated in the conference call that: 1) Unit 1 of Maithon
would be commissioned in June and Unit 2 in October; 2) Mundra is on
track for 3QFY11; and 3) it would seek exemption from the Indonesian
government for a minimum price obligation given its fixed price contract
with Bumi for Mundra falls under an integrated investment mechanism. If
exemption is not granted, it would likely have to pay about US$30-
US$35/ton more for 2.6mn tons of coal that it could receive from Bumi
under the fixed price contract.
What to do with the stock
We reiterate our Buy rating on Tata Power. We lower our 12m SOTP-based
TP to Rs1,436 (from Rs1,477) and FY12E/13E EPS by 4% primarily to reflect
higher fuel costs for the Mundra power plant, pending the decision of the
Indonesian government. We believe Tata Power is best positioned to
withstand a high fuel cost environment, and news flow on commissioning
of 5GW of projects under construction and 6GW of projects under
development would be key catalysts for the stock. Key risk: Delay in receipt
of execution milestone approvals
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power Company (TTPW.BO)
Buy Equity Research
In line with expectations: Execution to gain momentum in FY12E
What surprised us
Tata Power (TTPW) reported FY11 PAT of Rs20.6bn, in line with GS
estimate and marginally higher than Bloomberg consensus estimate of
Rs19.6bn. The higher realizations at Bumi for 4QFY11 of US$87.6/ton vs.
US$73/ton in 3QFY11 and US$62.7/ton in 4QFY10 was offset by lower
production of 58mt vs. our estimate of 62mt. Merchant realizations were
Rs5/kwh for the Trombay unit 8 and Rs3.45/kwh for the Haldia unit.
Management indicated in the conference call that: 1) Unit 1 of Maithon
would be commissioned in June and Unit 2 in October; 2) Mundra is on
track for 3QFY11; and 3) it would seek exemption from the Indonesian
government for a minimum price obligation given its fixed price contract
with Bumi for Mundra falls under an integrated investment mechanism. If
exemption is not granted, it would likely have to pay about US$30-
US$35/ton more for 2.6mn tons of coal that it could receive from Bumi
under the fixed price contract.
What to do with the stock
We reiterate our Buy rating on Tata Power. We lower our 12m SOTP-based
TP to Rs1,436 (from Rs1,477) and FY12E/13E EPS by 4% primarily to reflect
higher fuel costs for the Mundra power plant, pending the decision of the
Indonesian government. We believe Tata Power is best positioned to
withstand a high fuel cost environment, and news flow on commissioning
of 5GW of projects under construction and 6GW of projects under
development would be key catalysts for the stock. Key risk: Delay in receipt
of execution milestone approvals
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