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Adani Power Ltd.
Good 2Q as merchant sales
allowed & didn’t provide MAT
�� 2Q beat on pre-PPA merchant sales & lack of MAT prov.
APL had a good 2Q as Rec PAT grew by 137%YoY (+44%QoQ) beating
consensus by 13% as APL won case v/s GUVNL to sell power on merchant
before PPA start, and volumes +122%YoY. Fuels cost rose 8%YoY on INR
depreciation. Cut PO to Rs112 (124) on cut in our FY12-14E EPS by 9-13% to
factor in 2 months delay at most sites, generation loss on lower PLF in FY12E on
start-up issues and higher coal costs at Tiroda on allocation of lower linkages by
CIL. Buy APL on (1) a +3x in capacity by FY13E via an unregulated model and (2)
3.1x EPS over FY11-13E on 77% power pre-sold at good tariffs, low cost
imported coal from parent, secure funding, location advantage & business model
(shift to PPAs from FY13E Chart 7). Stock many go sideways till coal linkages at
Mundra / Tiroda plants in 4QF’12.
2Q EBIT margin fell 180bps on inefficiency & higher fuel costs
APL 2Q gross generation at 3.3bn kWh +121%YoY. PLF of its Chinese plants
was poor @~75% v/s JSPL 92% (Chart 2). 2Q was led by a) ASP grew 18% on
570%YoY (+295% QoQ) growth in merchant volume (higher ASP @ Rs4.7/kWh)
as APL won case v/s GUVNL to sell power in merchant market before PPA starts,
and b) volumes +122%YoY as capacity 2x (1.98GW vs 990MW). Fuels cost rose
8%YoY on INR depreciation. EBIT margins fell 180bps. APL didn’t provide MAT of
Rs450mn under-protest. Including-MAT rec. PAT would have been up 95%YoY.
Competitive advantages - coal, location and visible scale-up
APL has secured low-cost fuel via coal linkages (25% of capacity) and contracts
with parent (42%). It has 86% of capacity located in the West - highest peak
power deficit (14.7%) vs India (9.8%) in FY11. These competitive advantages and
good pre-sales tariffs at ~Rs2.9 (Table 2) make APL the top margin (54% FY13E)
and RoE (20%) earner in our IPP universe. Risks: Delivery of coal in-line with
linkage letters of Ministry of Coal / with contract of ADE, imported coal - exposes it
to country, currency & freight risks and fall in power rates on lower power deficit.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Power Ltd.
Good 2Q as merchant sales
allowed & didn’t provide MAT
�� 2Q beat on pre-PPA merchant sales & lack of MAT prov.
APL had a good 2Q as Rec PAT grew by 137%YoY (+44%QoQ) beating
consensus by 13% as APL won case v/s GUVNL to sell power on merchant
before PPA start, and volumes +122%YoY. Fuels cost rose 8%YoY on INR
depreciation. Cut PO to Rs112 (124) on cut in our FY12-14E EPS by 9-13% to
factor in 2 months delay at most sites, generation loss on lower PLF in FY12E on
start-up issues and higher coal costs at Tiroda on allocation of lower linkages by
CIL. Buy APL on (1) a +3x in capacity by FY13E via an unregulated model and (2)
3.1x EPS over FY11-13E on 77% power pre-sold at good tariffs, low cost
imported coal from parent, secure funding, location advantage & business model
(shift to PPAs from FY13E Chart 7). Stock many go sideways till coal linkages at
Mundra / Tiroda plants in 4QF’12.
2Q EBIT margin fell 180bps on inefficiency & higher fuel costs
APL 2Q gross generation at 3.3bn kWh +121%YoY. PLF of its Chinese plants
was poor @~75% v/s JSPL 92% (Chart 2). 2Q was led by a) ASP grew 18% on
570%YoY (+295% QoQ) growth in merchant volume (higher ASP @ Rs4.7/kWh)
as APL won case v/s GUVNL to sell power in merchant market before PPA starts,
and b) volumes +122%YoY as capacity 2x (1.98GW vs 990MW). Fuels cost rose
8%YoY on INR depreciation. EBIT margins fell 180bps. APL didn’t provide MAT of
Rs450mn under-protest. Including-MAT rec. PAT would have been up 95%YoY.
Competitive advantages - coal, location and visible scale-up
APL has secured low-cost fuel via coal linkages (25% of capacity) and contracts
with parent (42%). It has 86% of capacity located in the West - highest peak
power deficit (14.7%) vs India (9.8%) in FY11. These competitive advantages and
good pre-sales tariffs at ~Rs2.9 (Table 2) make APL the top margin (54% FY13E)
and RoE (20%) earner in our IPP universe. Risks: Delivery of coal in-line with
linkage letters of Ministry of Coal / with contract of ADE, imported coal - exposes it
to country, currency & freight risks and fall in power rates on lower power deficit.
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