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Lanco Infratech Ltd.
Media reported on AuD3.5bn
lawsuit
„Sharp reaction unwarranted, Reiterate Buy
Lanco’s stock reacted negatively by 9% towards closing on Friday as media
reported that Perdaman Industries, a coal potential consumer, has filed lawsuit
against Lanco Infratech in the Supreme Court of Western Australia. Perdaman
has sought claims to the tune of AuD3.5bn, as media highlighted, towards facing
road blocks in developing the urea plant, for potential non-compliance with the
coal supply agreement executed between them. We think it is premature to
ascertain the quantum of liabilities that would accrue, if any, on Lanco as the
company indicated that Perdaman is yet to file statement of claim explaining the
basis. Reiterate Buy with revised PO Rs 60/sh as the stock trading at lowest
quartile of P/E band, 78% sales volume FY11E-13E CAGR, shift towards LT sales
(¾ by FY13E) & ~2/3rd capacities have fuel cost inflation recoverable.
Background: Perdaman – a user for 17% of coal output
Perdaman Industries is engaged in the urea production and is in the process of
setting up 2 mtpa urea plant at Collie, Western Australia. Lanco and Perdaman
Industries has agreed for supply of ~ 2.75 mtpa of coal from the Lanco’s Griffin
coal mines in Western Australia to the urea plant. The proposed supply is
expected to commence from FY15 onwards. This would account for 19% of the
expanded production planned at about 17 mtpa at the Griffin coal mines from the
current level of 4 mtpa over the next 4 years.
Griffin mines constitute 11% of SoTP
Griffin coal mines add about Rs7/sh to our SoTP (11%). We have assumed the
sale of coal to the Perdaman Industries at about AuD60/t as indicated by the
management. However, if the coal is sold at a higher price, assume at AuD80/t,
than the PO would increase by 2%. Downside risks: significant fall in ST prices,
shortfall in fuel supply, regulatory risk and delays in execution, aggressive
competitive bids and worsening SEB financials.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco Infratech Ltd.
Media reported on AuD3.5bn
lawsuit
„Sharp reaction unwarranted, Reiterate Buy
Lanco’s stock reacted negatively by 9% towards closing on Friday as media
reported that Perdaman Industries, a coal potential consumer, has filed lawsuit
against Lanco Infratech in the Supreme Court of Western Australia. Perdaman
has sought claims to the tune of AuD3.5bn, as media highlighted, towards facing
road blocks in developing the urea plant, for potential non-compliance with the
coal supply agreement executed between them. We think it is premature to
ascertain the quantum of liabilities that would accrue, if any, on Lanco as the
company indicated that Perdaman is yet to file statement of claim explaining the
basis. Reiterate Buy with revised PO Rs 60/sh as the stock trading at lowest
quartile of P/E band, 78% sales volume FY11E-13E CAGR, shift towards LT sales
(¾ by FY13E) & ~2/3rd capacities have fuel cost inflation recoverable.
Background: Perdaman – a user for 17% of coal output
Perdaman Industries is engaged in the urea production and is in the process of
setting up 2 mtpa urea plant at Collie, Western Australia. Lanco and Perdaman
Industries has agreed for supply of ~ 2.75 mtpa of coal from the Lanco’s Griffin
coal mines in Western Australia to the urea plant. The proposed supply is
expected to commence from FY15 onwards. This would account for 19% of the
expanded production planned at about 17 mtpa at the Griffin coal mines from the
current level of 4 mtpa over the next 4 years.
Griffin mines constitute 11% of SoTP
Griffin coal mines add about Rs7/sh to our SoTP (11%). We have assumed the
sale of coal to the Perdaman Industries at about AuD60/t as indicated by the
management. However, if the coal is sold at a higher price, assume at AuD80/t,
than the PO would increase by 2%. Downside risks: significant fall in ST prices,
shortfall in fuel supply, regulatory risk and delays in execution, aggressive
competitive bids and worsening SEB financials.
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