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http://content.icicidirect.com/mailimages/ICICIdirect_NeyveliLigniteCorp_Q3FY12.pdf
P A T b e l o w e s t i m a t e s …
Neyveli Lignite reported in line sales for Q3FY12. However, higher fuel
costs QoQ despite a decline in generation led to lower EBITDA margin
(21.8% vs. our estimate: 30%) and PAT in Q3FY12. While we like the
regulated nature of its business (with no merchant power exposure); 1)
sluggish capacity addition (coupled with delays) and 2) increased debtor
days (using surplus cash to fund working capital requirement). We
maintain our HOLD rating on the stock with a revised target price of | 94
due to a decline in WACC from 12% to 11.5%.
ƒ Capacity addition of 500 MW in FY13
For FY12, we expect no capacity addition. For FY13, the capacity
addition for the company stands at 500 MW. The 1000 MW Tuticorin
expansion will be commissioned in FY14. The Barsingsar unit (250
MW) was operating at sub–optimal PLF due to operational/technical
issues with the turbine. In December 2011 and January 2012 both
units commenced commercial production.
ƒ Increase in debtor days a cause for worry
The company sells ~100% output to Tamil Nadu SEB (loss of |
11353 crore in FY10). Accumulated debtors level till date is ~| 1600
crore from TNSEB. The management maintained that the company
is receiving ~|100 crore every month from TNSEB. However, we
believe that deterioration in the working capital cycle in the coming
quarters will persist unless banks give short term lending or TNSEB
is able to raise bonds.
V a l u a t i o n
At the CMP of | 96, the stock is trading at a P/E of 12.9x and 13.1x on
FY12E and FY13E EPS, respectively. Similarly, on P/BV multiple, the stock
is trading at 1.4x FY12E and 1.3x FY13E, book value. Delay in capacity
additions and worsening finances of off taker (Tamil Nadu SEB) – in spite
of a proposed tariff hike of 40% restricts the future outperformance of the
stock. We maintain our HOLD rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
http://content.icicidirect.com/mailimages/ICICIdirect_NeyveliLigniteCorp_Q3FY12.pdf
P A T b e l o w e s t i m a t e s …
Neyveli Lignite reported in line sales for Q3FY12. However, higher fuel
costs QoQ despite a decline in generation led to lower EBITDA margin
(21.8% vs. our estimate: 30%) and PAT in Q3FY12. While we like the
regulated nature of its business (with no merchant power exposure); 1)
sluggish capacity addition (coupled with delays) and 2) increased debtor
days (using surplus cash to fund working capital requirement). We
maintain our HOLD rating on the stock with a revised target price of | 94
due to a decline in WACC from 12% to 11.5%.
ƒ Capacity addition of 500 MW in FY13
For FY12, we expect no capacity addition. For FY13, the capacity
addition for the company stands at 500 MW. The 1000 MW Tuticorin
expansion will be commissioned in FY14. The Barsingsar unit (250
MW) was operating at sub–optimal PLF due to operational/technical
issues with the turbine. In December 2011 and January 2012 both
units commenced commercial production.
ƒ Increase in debtor days a cause for worry
The company sells ~100% output to Tamil Nadu SEB (loss of |
11353 crore in FY10). Accumulated debtors level till date is ~| 1600
crore from TNSEB. The management maintained that the company
is receiving ~|100 crore every month from TNSEB. However, we
believe that deterioration in the working capital cycle in the coming
quarters will persist unless banks give short term lending or TNSEB
is able to raise bonds.
V a l u a t i o n
At the CMP of | 96, the stock is trading at a P/E of 12.9x and 13.1x on
FY12E and FY13E EPS, respectively. Similarly, on P/BV multiple, the stock
is trading at 1.4x FY12E and 1.3x FY13E, book value. Delay in capacity
additions and worsening finances of off taker (Tamil Nadu SEB) – in spite
of a proposed tariff hike of 40% restricts the future outperformance of the
stock. We maintain our HOLD rating
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