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Adani Power
Reuters: ADAN.BO Bloomberg: ADANI IN Exchange: BSE Ticker: ADAN
Re-setting expectations in sync with environment
Strong growth phase and reasonable valuations on our estimates: Buy
Adani Power has commanded a premium for its execution capabilities and has
demonstrated timely capacity addition which only a few of its peers can emulate.
However, come 2013, important investor issues should include adequate fuel
supplies and incremental merchant volumes/pricing. The share price has corrected
c16% since the recent quarterly miss. Despite lower expectations, at 2.0x FY13E
BV we see upside potential: Maintain Buy with new TP of INR105.
Management confident of coal availability over next 18 months
While long-term coal availability looks reasonably assured from supplies from
recent acquisitions by Adani Enterprises (AEL), the issue is more key over the next
18 months. Post the recent results announcement, the company’s communiqué
mentioned that even with lower coal availability from domestic supplies, the rampup
of coal o/p from Indonesia should ensure 80-85% operations in all units.
Our estimates are based on company being able to run 6,600 MW in FY13e
Given the strong commissioning schedule of 3,960 MW over the next 12 months
and the ramp-up of generation volumes, we believe FY13 net income will be a key
point to monitor. Accordingly, on lower volume assumptions (22/6% cut), despite
our revised EPS estimates of INR5.8 for FY12e (40% below street) and INR12.8
EPS for FY13e (6% below street), we estimate an earnings run-rate of c100% YoY
starting 2HFY12e. At USD36 /t coal, we estimate 31% RoE for FY13e.
Reiterating Buy at INR105 target price; fuel could be a game changer
We lower our target price to INR105, valuing Adani on SOTP of project values on
NPV considering a 12.5-15% cost of equity. Risks are a change in Indonesian Coal
Law, as a USD15/t change in the coal price would reduce our target price by
INR24 (APL has 9.6mnt supply contracts with AEL’s mine in Indonesia) and a
shortfall in domestic coal availability
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Power
Reuters: ADAN.BO Bloomberg: ADANI IN Exchange: BSE Ticker: ADAN
Re-setting expectations in sync with environment
Strong growth phase and reasonable valuations on our estimates: Buy
Adani Power has commanded a premium for its execution capabilities and has
demonstrated timely capacity addition which only a few of its peers can emulate.
However, come 2013, important investor issues should include adequate fuel
supplies and incremental merchant volumes/pricing. The share price has corrected
c16% since the recent quarterly miss. Despite lower expectations, at 2.0x FY13E
BV we see upside potential: Maintain Buy with new TP of INR105.
Management confident of coal availability over next 18 months
While long-term coal availability looks reasonably assured from supplies from
recent acquisitions by Adani Enterprises (AEL), the issue is more key over the next
18 months. Post the recent results announcement, the company’s communiqué
mentioned that even with lower coal availability from domestic supplies, the rampup
of coal o/p from Indonesia should ensure 80-85% operations in all units.
Our estimates are based on company being able to run 6,600 MW in FY13e
Given the strong commissioning schedule of 3,960 MW over the next 12 months
and the ramp-up of generation volumes, we believe FY13 net income will be a key
point to monitor. Accordingly, on lower volume assumptions (22/6% cut), despite
our revised EPS estimates of INR5.8 for FY12e (40% below street) and INR12.8
EPS for FY13e (6% below street), we estimate an earnings run-rate of c100% YoY
starting 2HFY12e. At USD36 /t coal, we estimate 31% RoE for FY13e.
Reiterating Buy at INR105 target price; fuel could be a game changer
We lower our target price to INR105, valuing Adani on SOTP of project values on
NPV considering a 12.5-15% cost of equity. Risks are a change in Indonesian Coal
Law, as a USD15/t change in the coal price would reduce our target price by
INR24 (APL has 9.6mnt supply contracts with AEL’s mine in Indonesia) and a
shortfall in domestic coal availability
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