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Tata Power
Overweight
TTPW.BO, TPWR IN
4q results aided by strong coal prices
• 4Q results in line barring lower taxes. TPWR reported consol PAT of
Rs6.6B up 15% yoy. EBITDA growth of 8% yoy was in line with
estimates, however PAT was ahead of expectations due to a lower tax
expense on account of MAT credit, higher tax free income and lower
deferred taxes. Coal realizations improved sharply, up 40% yoy to
$87.4/ton (JPM est. $86.7/ton for CY11), with the increase in
international coal prices coming through in the results. However
volumes declined by ~12% yoy to 14MT. Amongst TPWR's key
subsidiaries, NDPL’s PAT decreased by 57% yoy due to increase in
interest costs with fresh borrowing.
• Potential increase in fuel cost for Mundra. According to management
the Mundra UMPP could see a $25-30/ton (JPM est. $40/ton FOB)
increase in fuel cost if the Indonesian Govt sets a minimum floor price
for exports. The increase would be applicable to ~1/4th of total quantity
required. Mundra UMPP currently contributes Rs71 or ~5% to our
SOTP valuation. The increase in fuel cost by $25/ton would erode this
value completely while decreasing FY13/14 consol. estimates by 7-8%.
• Short term PPA signed for Maithon, more visibility on fuel supply.
TPWR has signed a 1 year PPA for 309MW with NDPL and BRPL (at
Rs3.45 for the former) thru March 2012 until sales under regulated rates
commences. Our FY12 estimate would increase by ~8% if the project is
commissioned on time and fuel is available. Maithon requires 5.1MT of
coal to operate at an 85% PLF and recover its fixed costs. FSA for the
first unit has been signed, while the LOA for Unit 2 will be converted
closer to commissioning. In addition ~1MT of coal supply has been
arranged from Tata Steel.
• Maintain OW and price target of Rs1,500. Recent newsflow on
restrictions on export pricing of Indonesian coal has resulted in stock
underperformance. This is a potential risk to our price target, if and when
the policy change comes through. However an increase in coal prices is
positive for coal mine valuations, while the early commissioning of
Maithon is also an upside catalyst
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power
Overweight
TTPW.BO, TPWR IN
4q results aided by strong coal prices
• 4Q results in line barring lower taxes. TPWR reported consol PAT of
Rs6.6B up 15% yoy. EBITDA growth of 8% yoy was in line with
estimates, however PAT was ahead of expectations due to a lower tax
expense on account of MAT credit, higher tax free income and lower
deferred taxes. Coal realizations improved sharply, up 40% yoy to
$87.4/ton (JPM est. $86.7/ton for CY11), with the increase in
international coal prices coming through in the results. However
volumes declined by ~12% yoy to 14MT. Amongst TPWR's key
subsidiaries, NDPL’s PAT decreased by 57% yoy due to increase in
interest costs with fresh borrowing.
• Potential increase in fuel cost for Mundra. According to management
the Mundra UMPP could see a $25-30/ton (JPM est. $40/ton FOB)
increase in fuel cost if the Indonesian Govt sets a minimum floor price
for exports. The increase would be applicable to ~1/4th of total quantity
required. Mundra UMPP currently contributes Rs71 or ~5% to our
SOTP valuation. The increase in fuel cost by $25/ton would erode this
value completely while decreasing FY13/14 consol. estimates by 7-8%.
• Short term PPA signed for Maithon, more visibility on fuel supply.
TPWR has signed a 1 year PPA for 309MW with NDPL and BRPL (at
Rs3.45 for the former) thru March 2012 until sales under regulated rates
commences. Our FY12 estimate would increase by ~8% if the project is
commissioned on time and fuel is available. Maithon requires 5.1MT of
coal to operate at an 85% PLF and recover its fixed costs. FSA for the
first unit has been signed, while the LOA for Unit 2 will be converted
closer to commissioning. In addition ~1MT of coal supply has been
arranged from Tata Steel.
• Maintain OW and price target of Rs1,500. Recent newsflow on
restrictions on export pricing of Indonesian coal has resulted in stock
underperformance. This is a potential risk to our price target, if and when
the policy change comes through. However an increase in coal prices is
positive for coal mine valuations, while the early commissioning of
Maithon is also an upside catalyst
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