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Adani Power Ltd. — Weak Chinese plant
operation & shut-downs drive weak 1Q
Country Overview
1Q hit on start-up pain / plant shut-downs; Cut EPS & PO
APL 1Q Rec. PAT at Rs1.8bn, +55%YoY (-24% vs. BofAMLe) on gross
generation 13% below BofAMLe @ lower PLF (74%) on poor performance of
Chinese plants, shut-down at unit 1, lower ASP on lower merchant volume (-
16%QoQ) at 47%YoY lower non-PPA ASP and 8%YoY higher fuels. Cut EPS 22%
& 14% for FY12E & FY13E, resp., to factor in 1-2 months’ delay at its 660MW
units, +100bps auxiliary consumption, higher shut-down time for the Chinese
plants, lower PLF in FY12E on start-up losses, and we cut PO to Rs124 (Rs140).
Buy APL on (1) a +3x in capacity by FY13E via an unregulated model (no cap on
RoE) and (2) visibility of 3.3x EPS over FY11-13E on 77% power pre-sold at
decent tariffs, secured funding, location advantage & business model (shift to
PPAs from FY13E Chart 8). Expect stock to go sideways near term till start of
coal linkages at Mundra / Tiroda plants in 3Q11.
1Q margin fall of 1027bps on inefficiency & higher fuel cost
APL 1Q gross generation at 3.2bn kWh +177%YoY (-13% BofAMLe). Even
factoring in planned shut-downs (20 days on 330MW &10 days on 660MW), the
average PLF of its Chinese plants was poor @~80% vs. JSPL 97% (Chart 2). 1Q
ASP fell 16%YoY, as low-ASP PPA volume soared to ~91% of volume in the
stabilization phase and led to merchant volume (-16%QoQ). Further, a 47%YoY
lower merchant/UI rate and 8%YoY higher fuel cost @ Rs1.15/kWh led to a
1027bps fall in EBITDA margin.
Competitive advantages - coal, location and visible scale-up
APL has secured low-cost fuel via coal linkages (38% of capacity) and contracts
with parent (23%). It has 86% of capacity located in the West - highest peak
power deficit (14.7%) vs. India (9.8%) in FY11. These competitive advantages
and healthy pre-sales tariffs, at ~Rs2.9 (see Table 2), make APL the top margin
(55% in FY13E) and RoE (21%) earner in our IPP universe. Risks: execution,
delivery of coal in line with linkage letters of Ministry of Coal, imported coal -
exposes it to country, currency and freight risks, and fall in power rates on lower
p ower deficit.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Power Ltd. — Weak Chinese plant
operation & shut-downs drive weak 1Q
Country Overview
1Q hit on start-up pain / plant shut-downs; Cut EPS & PO
APL 1Q Rec. PAT at Rs1.8bn, +55%YoY (-24% vs. BofAMLe) on gross
generation 13% below BofAMLe @ lower PLF (74%) on poor performance of
Chinese plants, shut-down at unit 1, lower ASP on lower merchant volume (-
16%QoQ) at 47%YoY lower non-PPA ASP and 8%YoY higher fuels. Cut EPS 22%
& 14% for FY12E & FY13E, resp., to factor in 1-2 months’ delay at its 660MW
units, +100bps auxiliary consumption, higher shut-down time for the Chinese
plants, lower PLF in FY12E on start-up losses, and we cut PO to Rs124 (Rs140).
Buy APL on (1) a +3x in capacity by FY13E via an unregulated model (no cap on
RoE) and (2) visibility of 3.3x EPS over FY11-13E on 77% power pre-sold at
decent tariffs, secured funding, location advantage & business model (shift to
PPAs from FY13E Chart 8). Expect stock to go sideways near term till start of
coal linkages at Mundra / Tiroda plants in 3Q11.
1Q margin fall of 1027bps on inefficiency & higher fuel cost
APL 1Q gross generation at 3.2bn kWh +177%YoY (-13% BofAMLe). Even
factoring in planned shut-downs (20 days on 330MW &10 days on 660MW), the
average PLF of its Chinese plants was poor @~80% vs. JSPL 97% (Chart 2). 1Q
ASP fell 16%YoY, as low-ASP PPA volume soared to ~91% of volume in the
stabilization phase and led to merchant volume (-16%QoQ). Further, a 47%YoY
lower merchant/UI rate and 8%YoY higher fuel cost @ Rs1.15/kWh led to a
1027bps fall in EBITDA margin.
Competitive advantages - coal, location and visible scale-up
APL has secured low-cost fuel via coal linkages (38% of capacity) and contracts
with parent (23%). It has 86% of capacity located in the West - highest peak
power deficit (14.7%) vs. India (9.8%) in FY11. These competitive advantages
and healthy pre-sales tariffs, at ~Rs2.9 (see Table 2), make APL the top margin
(55% in FY13E) and RoE (21%) earner in our IPP universe. Risks: execution,
delivery of coal in line with linkage letters of Ministry of Coal, imported coal -
exposes it to country, currency and freight risks, and fall in power rates on lower
p ower deficit.
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