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India Equity Research Reports, IPO and Stock News
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Reliance Power (RPWR)
Utilities
Stable extant operations, question marks on future capacities. Reliance Power
(RPWR) reported another quarter of strong operations at Rosa I with PLF increasing to
91% in 1QFY12 driven by blending of imported coal (and washery rejects). However,
execution delays coupled with fuel uncertainty for both gas and coal-based plants drive
our negative stance on RPWR. We maintain SELL with a revised target price of Rs88
(previously Rs110) as we adjust for commissioning delays.
Higher other income, lower depreciation and taxes boost reported income
RPWR reported revenues of Rs5.4 bn (9% qoq), operating profit of Rs1.8 bn (19% qoq) and net
income of Rs1.96 bn (5% qoq) against our estimates of Rs5.9 bn, Rs1.6 bn and Rs1.4 bn,
respectively. Operating profits were 14% ahead of our estimates primarily on account of higher
generation and lower-than-estimated overheads and employee expenses. Further, net income beat
was driven by higher-than-estimated other income (Rs1.5 bn against estimated Rs1.2 bn) and
lower depreciation and tax rate (14% against our estimate of 20%). We discuss the key
operational and financial highlight of 1QFY12 results in the subsequent section.
Underperformance notwithstanding, issues still exist
Continued uncertainty over availability of gas on account of slow ramp-up of supply from KG – D6
block makes us skeptical about the prospects of securing gas for the proposed 2,400 MW of gasbased
capacities at Samalkot. Further recent decision by the Indonesian Government to impose a
minimum obligatory pricing for all coal export contract put RPWR’s Krishnapatnam UMPP in a
limbo. We do not see any visible progress on the Chitrangi project (3,960 MW) which drives bulk
of the value for RPWR’s portfolio. We note that Chitrangi is yet to be financially closed and the
commissioning schedule for the same has been delayed to FY2016E.
Retain SELL with a revised target price of Rs88/share
RPWR stock has corrected by ~23% in the past month and is now trading at 1.4X FY2013E book.
We, however, maintain our cautious stance on RPWR given the limited visibility on near-term
earnings growth and high degree of execution and fuel risk embedded in the portfolio. We
maintain our SELL rating on RPWR with a revised target price of Rs88/share (previously
Rs110/share) as we adjust for commissioning delays and remove Krishnapatnam from our
valuation. We have revised our EPS estimates for FY2012E to Rs2.9/share (previously Rs3.8/share)
and for FY2013E to Rs2.9/share (previously Rs3.1/share) as we account for delays in commissioning
of projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Power (RPWR)
Utilities
Stable extant operations, question marks on future capacities. Reliance Power
(RPWR) reported another quarter of strong operations at Rosa I with PLF increasing to
91% in 1QFY12 driven by blending of imported coal (and washery rejects). However,
execution delays coupled with fuel uncertainty for both gas and coal-based plants drive
our negative stance on RPWR. We maintain SELL with a revised target price of Rs88
(previously Rs110) as we adjust for commissioning delays.
Higher other income, lower depreciation and taxes boost reported income
RPWR reported revenues of Rs5.4 bn (9% qoq), operating profit of Rs1.8 bn (19% qoq) and net
income of Rs1.96 bn (5% qoq) against our estimates of Rs5.9 bn, Rs1.6 bn and Rs1.4 bn,
respectively. Operating profits were 14% ahead of our estimates primarily on account of higher
generation and lower-than-estimated overheads and employee expenses. Further, net income beat
was driven by higher-than-estimated other income (Rs1.5 bn against estimated Rs1.2 bn) and
lower depreciation and tax rate (14% against our estimate of 20%). We discuss the key
operational and financial highlight of 1QFY12 results in the subsequent section.
Underperformance notwithstanding, issues still exist
Continued uncertainty over availability of gas on account of slow ramp-up of supply from KG – D6
block makes us skeptical about the prospects of securing gas for the proposed 2,400 MW of gasbased
capacities at Samalkot. Further recent decision by the Indonesian Government to impose a
minimum obligatory pricing for all coal export contract put RPWR’s Krishnapatnam UMPP in a
limbo. We do not see any visible progress on the Chitrangi project (3,960 MW) which drives bulk
of the value for RPWR’s portfolio. We note that Chitrangi is yet to be financially closed and the
commissioning schedule for the same has been delayed to FY2016E.
Retain SELL with a revised target price of Rs88/share
RPWR stock has corrected by ~23% in the past month and is now trading at 1.4X FY2013E book.
We, however, maintain our cautious stance on RPWR given the limited visibility on near-term
earnings growth and high degree of execution and fuel risk embedded in the portfolio. We
maintain our SELL rating on RPWR with a revised target price of Rs88/share (previously
Rs110/share) as we adjust for commissioning delays and remove Krishnapatnam from our
valuation. We have revised our EPS estimates for FY2012E to Rs2.9/share (previously Rs3.8/share)
and for FY2013E to Rs2.9/share (previously Rs3.1/share) as we account for delays in commissioning
of projects.
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