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Adani Enterprises Ltd
Reducing Estimates, Shifting
Preference to Mundra
What's Changed
Price Target Rs874.00 to Rs623.00
EPS F12e/F13e -32% / -28%
In view of strong execution skills, stable balance
sheet and strong cash flows (relative to Indian
infrastructure peers), we retain our OW rating.
However, with Adani Power (ADAN.BO, Rs89.25;
our Utilities team’s top UW call) still contributing
36% of earnings (F2012-14e) and 15% of the value,
we shift our group preference to Mundra Port.
After Adani Power’s disappointment, we cut our
F2012-13 earnings estimates by 28-32%:
• The bulk of this reduction (nearly 80%) stems from
Adani Power, where Morgan Stanley analyst Parag
Gupta has lowered his F2012-13e earnings by
31-32% given the F1Q12 disappointment.
• The rest is an even split between the impact of the
MAT application on Mundra SEZ…
• …and our lower margin assumptions (both short
and long term) in the coal trading business.
Our price target moves down 29% to Rs623 but still
implies 17% upside: The cut reflects the following:
• Our estimate reductions, which alone account for a
10% decrease in our price target.
• Time value is a 6-7% positive, but the discount rate
we apply has risen (higher risk-free rate, additional
risk premium for some businesses including mining).
The net result is a 7% negative.
• Given the environment and greater difficulty in land
acquisition in India, we believe that the market is
likely to be unwilling to pay for future projects. The
removal of these projects lowers our PT another
11%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Enterprises Ltd
Reducing Estimates, Shifting
Preference to Mundra
What's Changed
Price Target Rs874.00 to Rs623.00
EPS F12e/F13e -32% / -28%
In view of strong execution skills, stable balance
sheet and strong cash flows (relative to Indian
infrastructure peers), we retain our OW rating.
However, with Adani Power (ADAN.BO, Rs89.25;
our Utilities team’s top UW call) still contributing
36% of earnings (F2012-14e) and 15% of the value,
we shift our group preference to Mundra Port.
After Adani Power’s disappointment, we cut our
F2012-13 earnings estimates by 28-32%:
• The bulk of this reduction (nearly 80%) stems from
Adani Power, where Morgan Stanley analyst Parag
Gupta has lowered his F2012-13e earnings by
31-32% given the F1Q12 disappointment.
• The rest is an even split between the impact of the
MAT application on Mundra SEZ…
• …and our lower margin assumptions (both short
and long term) in the coal trading business.
Our price target moves down 29% to Rs623 but still
implies 17% upside: The cut reflects the following:
• Our estimate reductions, which alone account for a
10% decrease in our price target.
• Time value is a 6-7% positive, but the discount rate
we apply has risen (higher risk-free rate, additional
risk premium for some businesses including mining).
The net result is a 7% negative.
• Given the environment and greater difficulty in land
acquisition in India, we believe that the market is
likely to be unwilling to pay for future projects. The
removal of these projects lowers our PT another
11%.
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