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Tata Power (TPWR)
Utilities
Coal at US$94/ton continues to drive consolidated earnings. Tata Power (TPWR)
consolidated earnings continue to be driven by strong 29% yoy growth in coal revenues
that compensated for the modest performance of the power business. Growth in the
coal business was primarily driven by higher realizations, though partially offset by
write- offs of exploration costs previously deferred. We continue to remain positive on
the prospects of the coal business, and maintain our ADD rating with a PT of Rs1,490.
Net income boosted by higher dividend income
TPWR reported standalone revenues of Rs18.4 bn (2% yoy, 13% qoq), operating profit of Rs3.5
bn (-10% yoy, 25% qoq) and net profit of Rs2.9 bn (10% yoy, 13% qoq) in 1QFY12 compared to
our estimate of Rs18.8 bn, Rs4.1 bn and Rs2.8 bn, respectively. The EBITDA miss was primarily
driven by (1) lower-than-estimated merchant realization at Haldia and Trombay and (2) lower unit
sales during the quarter. However, net income was boosted by higher-than-estimated other
income due to Rs2 bn of dividend from coal SPVs. We discuss the key highlights of the standalone
result in a subsequent section.
Coal realizations continue to head north
TPWR reported consolidated revenues of Rs58 bn (13% yoy, 16% qoq), operating profit of Rs14
bn (27% yoy, 19% qoq) and PAT of Rs3.4 bn (-27% yoy, -38% qoq) in 1QFY12. Standalone
revenues of Rs18.4 bn were augmented by (1) coal revenues of Rs19.9 bn, (2) revenues from NDPL
of Rs12.1 bn and (3) revenue from power trading of Rs6.6 bn, respectively. The coal business
continues to drive consolidated earnings with strong realizations of US$94/ton (30% yoy, 7.7%
qoq) though the benefits of higher realization was lost to write-offs of deferred exploration costs
pertaining to Arutmin during the quarter. Profitability was further dented by the high effective tax
rate of 55% while reported net income of Rs.4.2 bn included forex gain of Rs898 mn.
Maintain ADD with a target price of Rs1,490/share
We maintain our ADD rating on TPWR and marginally revise our target price to Rs1,490 (previously
Rs1,480/share). We like TPWR for its resource ownership and limited earnings risk on account of
integrated and regulated business model. Our SOTP valuation comprises four components—
(1) value of operating power assets at Rs426/share, (2) valuation of investments and cash in books
equivalent to Rs469/share, (3) projects under-implementation valued at Rs321/share (Mundra and
Maithon) and (4) valuation of stake in coal mines in Indonesia valued at Rs275/share. We have
revised our earning estimates to Rs90/share for FY2012E (previously Rs104/share) and Rs111 for
F2013E (previously Rs119/share) to account for higher tax rate due to deferred tax arising from
wind assets.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power (TPWR)
Utilities
Coal at US$94/ton continues to drive consolidated earnings. Tata Power (TPWR)
consolidated earnings continue to be driven by strong 29% yoy growth in coal revenues
that compensated for the modest performance of the power business. Growth in the
coal business was primarily driven by higher realizations, though partially offset by
write- offs of exploration costs previously deferred. We continue to remain positive on
the prospects of the coal business, and maintain our ADD rating with a PT of Rs1,490.
Net income boosted by higher dividend income
TPWR reported standalone revenues of Rs18.4 bn (2% yoy, 13% qoq), operating profit of Rs3.5
bn (-10% yoy, 25% qoq) and net profit of Rs2.9 bn (10% yoy, 13% qoq) in 1QFY12 compared to
our estimate of Rs18.8 bn, Rs4.1 bn and Rs2.8 bn, respectively. The EBITDA miss was primarily
driven by (1) lower-than-estimated merchant realization at Haldia and Trombay and (2) lower unit
sales during the quarter. However, net income was boosted by higher-than-estimated other
income due to Rs2 bn of dividend from coal SPVs. We discuss the key highlights of the standalone
result in a subsequent section.
Coal realizations continue to head north
TPWR reported consolidated revenues of Rs58 bn (13% yoy, 16% qoq), operating profit of Rs14
bn (27% yoy, 19% qoq) and PAT of Rs3.4 bn (-27% yoy, -38% qoq) in 1QFY12. Standalone
revenues of Rs18.4 bn were augmented by (1) coal revenues of Rs19.9 bn, (2) revenues from NDPL
of Rs12.1 bn and (3) revenue from power trading of Rs6.6 bn, respectively. The coal business
continues to drive consolidated earnings with strong realizations of US$94/ton (30% yoy, 7.7%
qoq) though the benefits of higher realization was lost to write-offs of deferred exploration costs
pertaining to Arutmin during the quarter. Profitability was further dented by the high effective tax
rate of 55% while reported net income of Rs.4.2 bn included forex gain of Rs898 mn.
Maintain ADD with a target price of Rs1,490/share
We maintain our ADD rating on TPWR and marginally revise our target price to Rs1,490 (previously
Rs1,480/share). We like TPWR for its resource ownership and limited earnings risk on account of
integrated and regulated business model. Our SOTP valuation comprises four components—
(1) value of operating power assets at Rs426/share, (2) valuation of investments and cash in books
equivalent to Rs469/share, (3) projects under-implementation valued at Rs321/share (Mundra and
Maithon) and (4) valuation of stake in coal mines in Indonesia valued at Rs275/share. We have
revised our earning estimates to Rs90/share for FY2012E (previously Rs104/share) and Rs111 for
F2013E (previously Rs119/share) to account for higher tax rate due to deferred tax arising from
wind assets.
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