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Lanco Infratech (LITL) reported a Q2FY12 loss of INR2.6bn inclusive of
MTM loss of ~INR2.9bn and an exceptional gain of INR489mn, adjusting
for which, the loss would be INR206mn as against our profit estimates of
INR613mn. Operational issues in new power projects as well as Griffin
coal continue to persist, which we believe will extend into H2FY12 as
well. Although we deem that assets continue to possess significant value,
frequent accounting changes and legal concerns would exert pressure on
the stock. Maintain BUY with SOTP based target price of INR32/share.
Loss at INR2.6bn against profit estimate of INR613mn
The reported loss included INR2.9bn towards MTM provisions and an exceptional gain
pursuant to converting Vidarbha power project into an associate (from a subsidiary
earlier). Losses were accentuated by lower PLFs at Amarkantak II and Kondapalli I as
well as by a sub‐par performance at Udipi due to transmission bottlenecks and
operational inefficiencies.
Seasonal factors affect Griffin production
The management indicated that Q2 was a seasonally weak period hence there was
negligible production of coal. However, it maintained the guidance of ~AUD30mn
EBITDA for FY12 which could be higher if the power customer agrees to tariff hikes. We
have factored in ~ INR3.3bn losses from Griffin in our estimates.
Outlook and valuations: Softer issues persist; maintain BUY
We have recalibrated our earnings to factor in delay in commissioning Udipi and
Anpara as well as the slow progress in Babandh and Vidarbha projects. We also take
cognizance of higher losses in its already commissioned assets. The near term
headwinds in terms of transmission bottlenecks and a slow ramp up in coal production
have led us to cut our earnings estimates. While we maintain ‘BUY/Sector
Underperformer’ due to its significant asset value, we also note that the stock
performance will be impacted by investor concerns over accounting changes and legal
issues.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco Infratech (LITL) reported a Q2FY12 loss of INR2.6bn inclusive of
MTM loss of ~INR2.9bn and an exceptional gain of INR489mn, adjusting
for which, the loss would be INR206mn as against our profit estimates of
INR613mn. Operational issues in new power projects as well as Griffin
coal continue to persist, which we believe will extend into H2FY12 as
well. Although we deem that assets continue to possess significant value,
frequent accounting changes and legal concerns would exert pressure on
the stock. Maintain BUY with SOTP based target price of INR32/share.
Loss at INR2.6bn against profit estimate of INR613mn
The reported loss included INR2.9bn towards MTM provisions and an exceptional gain
pursuant to converting Vidarbha power project into an associate (from a subsidiary
earlier). Losses were accentuated by lower PLFs at Amarkantak II and Kondapalli I as
well as by a sub‐par performance at Udipi due to transmission bottlenecks and
operational inefficiencies.
Seasonal factors affect Griffin production
The management indicated that Q2 was a seasonally weak period hence there was
negligible production of coal. However, it maintained the guidance of ~AUD30mn
EBITDA for FY12 which could be higher if the power customer agrees to tariff hikes. We
have factored in ~ INR3.3bn losses from Griffin in our estimates.
Outlook and valuations: Softer issues persist; maintain BUY
We have recalibrated our earnings to factor in delay in commissioning Udipi and
Anpara as well as the slow progress in Babandh and Vidarbha projects. We also take
cognizance of higher losses in its already commissioned assets. The near term
headwinds in terms of transmission bottlenecks and a slow ramp up in coal production
have led us to cut our earnings estimates. While we maintain ‘BUY/Sector
Underperformer’ due to its significant asset value, we also note that the stock
performance will be impacted by investor concerns over accounting changes and legal
issues.
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