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Tata Power Company Ltd. (TPWR) approached Ministry of Power (MoP) in light of potential project losses expected at its Mundra UMPP (4000MW) due to rise in Indonesian coal prices after change in Indonesian coal mining laws. However, MoP seems to be staying away from the matter as it has directed TPWR to sort out the issue directly with the procurers. In absence of any positive development, we cut our revenue and APAT estimates by 5%/2% and 2%/23% for FY12E/FY13E respectively. Consequently, our RoEs stand revised down to 14.3%/10.5% (earlier 14.6%/13.4%) for FY12E/FY13E. Despite the cut in revenue and APAT estimates for TPWR, we remain positive on the company. Maintain BUY with a revised target price of Rs1,203/share.
We revise down our Revenue and APAT estimates
We believe, due to increase in imported coal price, TPWR would incur potential losses at its Mundra UMPP. We have increased our coal price assumption to US$83/ton (earlier US$67/ton), which would lead to 54paisa/unit loss at average tariff of Rs2.26/unit in first year of full operation (FY14). That said, the cash loss over the life of UMPP would be Rs31 bn (-Rs130/share). In the given scenario, we have revised down our revenue estimate to Rs234 bn (-5%)/Rs283 bn (-2%) for FY12E/FY13E. Our APAT stands revised at Rs22.4 bn (-2%)/Rs18.7 bn (-23%) for FY12E/FY13E.
Our target price stands cut at Rs1,203/share
We have increased our Average Selling Price (ASP) assumption for TPWR’s coal to be sold in Indonesia to US$85/tonne (earlier US$80/tonne) for FY12E and US$80/tonne (earlier US$75/tonne) sustainable over a long period. As we adjust for our new coal price assumptions at Mundra UMPP and Indonesian coal interest of TPWR, the combined value for Mundra and coal asset comes to Rs368/share. Wherein, coal asset contributes Rs498/share and Mundra UMPP negates Rs130/share. Our weighted average price target (equal weightage to SOTP and P/BV) stands cut to Rs1,203/share (earlier Rs1,407/share).
Key Risk: Indonesian coal price volatility
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power Company Ltd. (TPWR) approached Ministry of Power (MoP) in light of potential project losses expected at its Mundra UMPP (4000MW) due to rise in Indonesian coal prices after change in Indonesian coal mining laws. However, MoP seems to be staying away from the matter as it has directed TPWR to sort out the issue directly with the procurers. In absence of any positive development, we cut our revenue and APAT estimates by 5%/2% and 2%/23% for FY12E/FY13E respectively. Consequently, our RoEs stand revised down to 14.3%/10.5% (earlier 14.6%/13.4%) for FY12E/FY13E. Despite the cut in revenue and APAT estimates for TPWR, we remain positive on the company. Maintain BUY with a revised target price of Rs1,203/share.
We revise down our Revenue and APAT estimates
We believe, due to increase in imported coal price, TPWR would incur potential losses at its Mundra UMPP. We have increased our coal price assumption to US$83/ton (earlier US$67/ton), which would lead to 54paisa/unit loss at average tariff of Rs2.26/unit in first year of full operation (FY14). That said, the cash loss over the life of UMPP would be Rs31 bn (-Rs130/share). In the given scenario, we have revised down our revenue estimate to Rs234 bn (-5%)/Rs283 bn (-2%) for FY12E/FY13E. Our APAT stands revised at Rs22.4 bn (-2%)/Rs18.7 bn (-23%) for FY12E/FY13E.
Our target price stands cut at Rs1,203/share
We have increased our Average Selling Price (ASP) assumption for TPWR’s coal to be sold in Indonesia to US$85/tonne (earlier US$80/tonne) for FY12E and US$80/tonne (earlier US$75/tonne) sustainable over a long period. As we adjust for our new coal price assumptions at Mundra UMPP and Indonesian coal interest of TPWR, the combined value for Mundra and coal asset comes to Rs368/share. Wherein, coal asset contributes Rs498/share and Mundra UMPP negates Rs130/share. Our weighted average price target (equal weightage to SOTP and P/BV) stands cut to Rs1,203/share (earlier Rs1,407/share).
Key Risk: Indonesian coal price volatility
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