Lanco Infratech -Elimination, construction margins and Udupi impact::Emkay

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Lanco Infratech Ltd.

Elimination, construction margins and Udupi impact

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CMP: Rs 34                                       Target Price: Rs 45

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n     Lanco’s PAT of Rs171mn was way below est. due to (1) higher inter-seg elimination again (60%), (2) Udupi still an associate (26%) and (3) lower construction margins 12.8%

n     We seek clarity on (1) negative other income of Rs352mn,(2) basis of recognition of Amarkantak II’s Haryana supplies and (3) merchant tariffs of Rs4.2/unit vs mgmt figure of Rs4.7/unit   

n     Factor in higher elimination (55%), delay in Udupi COD (Oct 11) - cut EPS by 13/10% in FY12E/13E. Key triggers - Anpara and Udupi COD, Consistent profit reporting from Griffin 

n     Maintain relative preference on valuations (1.1XFY13E book). Key concerns - dependence on domestic coal, Kondapalli III gas, downside in merchant prices (factored Rs4/unit)