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1QFY12 results
Lanco’s 1Q results are below expectations even after adjusting for higher
elimination of EPC revenues. Merchant realizations have fallen sharply
and Anpara and Udupi projects are further delayed. We will seek more
clarity on the expansion projects in the conference call on 16th August.
The earnings for FY12 however are most likely to be revised downwards.
We are increasing the discount to fair value to 50% given the
uncertainties regarding the possible liabilities due to the ongoing dispute
with Perdaman and cutting the target to Rs24/sh.
1Q result below expectations – adjusted for higher elimination
Lanco’s 1Q results are below expectations even after adjusting for higher
elimination of EPC revenues – cash profit at Rs3.7bn is up 1.3% YoY. Short
term realizations dropped sharply (Rs3.8/kWh) for merchant power plants
while Udupi project (regulated return project) made losses due to lower
availability of the plant. The company eliminated Rs11.5bn of EPC revenues
during consolidation as more construction work is currently on for the
subsidiaries - Kondapalli and Amarkantak. Lanco booked 20% margins on this
eliminated revenue.
More delays for Udupi and Anpara
Udupi (2 x 600MW) project would have more delays as the units are yet to
stabilize and the transmission line is delayed. The company has recently
changed the debt repayment schedule for this project. Anpara project (2 x
600MW) is also delayed after the accident during the pre- commissioning
exercise for the first unit.
No clarity on Perdaman litigation. Process could be long drawn.
Perdaman Industries had filed a case in Australia against Lanco demanding an
AUD3.5bn compensation for not complying with the coal supply contract.
Recently, Perdaman’s application for a “freezing order” to refrain Griffin from
entering into any charge or security without informing it has been dismissed.
However, the key point of contention still remains unresolved. The legal
process could be a long drawn one.
FY12 earnings would be cut sharply. TP cut to Rs24/sh.
We will seek more clarity on the progress of expansion projects in the
conference call on 16th August. The earnings for FY12 however are most likely
to be revised downwards. We are increasing the discount to fair value to 50%
given the uncertainties regarding the possible liabilities due to the ongoing
dispute with Perdaman and cutting the target to Rs24/sh.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QFY12 results
Lanco’s 1Q results are below expectations even after adjusting for higher
elimination of EPC revenues. Merchant realizations have fallen sharply
and Anpara and Udupi projects are further delayed. We will seek more
clarity on the expansion projects in the conference call on 16th August.
The earnings for FY12 however are most likely to be revised downwards.
We are increasing the discount to fair value to 50% given the
uncertainties regarding the possible liabilities due to the ongoing dispute
with Perdaman and cutting the target to Rs24/sh.
1Q result below expectations – adjusted for higher elimination
Lanco’s 1Q results are below expectations even after adjusting for higher
elimination of EPC revenues – cash profit at Rs3.7bn is up 1.3% YoY. Short
term realizations dropped sharply (Rs3.8/kWh) for merchant power plants
while Udupi project (regulated return project) made losses due to lower
availability of the plant. The company eliminated Rs11.5bn of EPC revenues
during consolidation as more construction work is currently on for the
subsidiaries - Kondapalli and Amarkantak. Lanco booked 20% margins on this
eliminated revenue.
More delays for Udupi and Anpara
Udupi (2 x 600MW) project would have more delays as the units are yet to
stabilize and the transmission line is delayed. The company has recently
changed the debt repayment schedule for this project. Anpara project (2 x
600MW) is also delayed after the accident during the pre- commissioning
exercise for the first unit.
No clarity on Perdaman litigation. Process could be long drawn.
Perdaman Industries had filed a case in Australia against Lanco demanding an
AUD3.5bn compensation for not complying with the coal supply contract.
Recently, Perdaman’s application for a “freezing order” to refrain Griffin from
entering into any charge or security without informing it has been dismissed.
However, the key point of contention still remains unresolved. The legal
process could be a long drawn one.
FY12 earnings would be cut sharply. TP cut to Rs24/sh.
We will seek more clarity on the progress of expansion projects in the
conference call on 16th August. The earnings for FY12 however are most likely
to be revised downwards. We are increasing the discount to fair value to 50%
given the uncertainties regarding the possible liabilities due to the ongoing
dispute with Perdaman and cutting the target to Rs24/sh.
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