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Ta t a Power
Weak 1Q as 45% Indo tax pinch
& weak merchant; Neutral
„1QFY12 Cons Rec PAT -20%YoY on higher taxes; Neutral
TPC 1Q Cons Rec PAT fell by 20%YoY on 1) taxes +88%YoY led by growth in PAT
driven by Indo coal profits, taxable @ 45%, Rs550mn deferred tax on wind capex,
16% tax on dividend from coal SPVs to parent and 2) weak merchant power business
– tariff fell 23%YoY (Trombay U8 -14% & Haldia -28%) & -20%YoY merchant volume
at Trombay U8. Cons. EBITDA +27% was led by coal business (EBIT +77%YoY) and
NDPL (EBIT +150%) offset by weak Parent (EBITDA -2%). Maintain non-consensus
Neutral led by limited stock upside, declining RoE beyond FY12E on start of lossmaking UMPP and premium valuations - FY12E P/BV of 1.9x vs sector 1.4x.
Strong coal / NDPL offset by higher taxes & weak merchant
A 23%YoY fall in merchant power tariff and 11%YoY fall in generation led by
Trombay -13%YoY drove Parent EBITDA -2%YoY. However, Rs2.2bn of dividend
from Coal SPVs led Rec PAT +33%YoY. Indo coal mines did well with ASP
US$94/tn (+30%YoY) and contribution US$53.6/tn (+40%YoY) while volume
+1%YoY only. NDPL PAT grew by 161%YoY on past claims, while other power
subs had weak 1Q - Powerlinks PAT -2%YoY & TP Trading PAT -9%YoY.
Regulatory risk: Coal costs may +75%
Key risk ahead as per management its fixed price (~$40/tn) coal purchase contract
with BUMI for Mundra UMPP due change of Indonesian law. Should TPC fail
convince Govt of Indonesia to allow export ~2.5mtpa at fixed price for 5 years, it will
have to shell-out Rs3.5bn ($30/tn more to align with Index) at Mundra UMPP. This
may hike FY13E loss at Mundra UMPP by 270%.
Reiterate our non-consensus Neutral rating
Uplifting of coal resources, scale-up in production to 100mtpa in 3-4 years time at
Indonesian coal mines and securing coal linkages in India for 3.9GW of IPP
capacity, shall improve visibility of profitable growth. Potential depletion of high kCal
coal reserves (Prima), lower net-long coal position with the start of Mundra UMPP,
fall in merchant power prices in FY12 and onwards creates volatility in earnings
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ta t a Power
Weak 1Q as 45% Indo tax pinch
& weak merchant; Neutral
„1QFY12 Cons Rec PAT -20%YoY on higher taxes; Neutral
TPC 1Q Cons Rec PAT fell by 20%YoY on 1) taxes +88%YoY led by growth in PAT
driven by Indo coal profits, taxable @ 45%, Rs550mn deferred tax on wind capex,
16% tax on dividend from coal SPVs to parent and 2) weak merchant power business
– tariff fell 23%YoY (Trombay U8 -14% & Haldia -28%) & -20%YoY merchant volume
at Trombay U8. Cons. EBITDA +27% was led by coal business (EBIT +77%YoY) and
NDPL (EBIT +150%) offset by weak Parent (EBITDA -2%). Maintain non-consensus
Neutral led by limited stock upside, declining RoE beyond FY12E on start of lossmaking UMPP and premium valuations - FY12E P/BV of 1.9x vs sector 1.4x.
Strong coal / NDPL offset by higher taxes & weak merchant
A 23%YoY fall in merchant power tariff and 11%YoY fall in generation led by
Trombay -13%YoY drove Parent EBITDA -2%YoY. However, Rs2.2bn of dividend
from Coal SPVs led Rec PAT +33%YoY. Indo coal mines did well with ASP
US$94/tn (+30%YoY) and contribution US$53.6/tn (+40%YoY) while volume
+1%YoY only. NDPL PAT grew by 161%YoY on past claims, while other power
subs had weak 1Q - Powerlinks PAT -2%YoY & TP Trading PAT -9%YoY.
Regulatory risk: Coal costs may +75%
Key risk ahead as per management its fixed price (~$40/tn) coal purchase contract
with BUMI for Mundra UMPP due change of Indonesian law. Should TPC fail
convince Govt of Indonesia to allow export ~2.5mtpa at fixed price for 5 years, it will
have to shell-out Rs3.5bn ($30/tn more to align with Index) at Mundra UMPP. This
may hike FY13E loss at Mundra UMPP by 270%.
Reiterate our non-consensus Neutral rating
Uplifting of coal resources, scale-up in production to 100mtpa in 3-4 years time at
Indonesian coal mines and securing coal linkages in India for 3.9GW of IPP
capacity, shall improve visibility of profitable growth. Potential depletion of high kCal
coal reserves (Prima), lower net-long coal position with the start of Mundra UMPP,
fall in merchant power prices in FY12 and onwards creates volatility in earnings
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