1QFY13 Results: Tata Power performance below estimate :: Motilal Oswal

1QFY13 Results: Tata Power performance below estimate
Impacted by loss at Mundra, Maithon plants and lower profit at coal SPV
 Consolidated PAT below estimate: Adjusted consolidated PAT for the quarter stood
at INR3.1b (v/s estimate of INR4.9b), led by 1) Higher losses at Mundra UMPP
owing to take or pay for Port, shipping and coal (losses at INR1.6b), 2) Losses at
Maithon project at INR178m given equipment issues v/s our estimate of marginal
profits, 3) KPC/Arutmin mines EBIT stood at INR2.5b v/s estimate of INR5.2b and
INR5.1b QoQ. Standalone adjusted PAT for 1Q stood at INR4.1b v/s estimate of
INR1.8b due to higher other income at INR3.5b (v/s estimate of INR0.9b), given
dividend income of ~INR2b from coal SPV.
 Core profit of coal SPVs impacted: During 1QFY13, KPC/Arutmin mines sales
volumes stood at 00m tons (up/down 00% YoY) and realisation dipped to USD84/
ton, vs USD94/ton YoY. Production cash cost increased 21% YoY to USD49/ton, leaving
gross contribution at USD35/ton, down from USD45/ton QoQ and USD54/ton YoY.
Cash cost stood higher despite muted oil cost. This is due to take or pay charges on
Infra facility created for evacuation of coal.
 Subsidiaries performance likely to be muted going forward: For Maithon project,
both the units are now operating but fuel supply could be an issue given delays in
rail line for transportation of coal. On Mundra UMPP, management expects loss of
~INR400m/month for FY13E. Coal SPVs profitability has been impacted due to
pressure on realisation along with cost increase owing to infrastructure cost. BUMI
has guided for realisation of coal at USD90/ton for CY12 and cost savings of USD2-
4/ton, unlikely to be attained given recent trends.
 Valuations and view - Earnings cut by 5-6% for FY13/14E: We cut our consolidated
earnings for TPWR by 5-6% for FY13/14E and expect consolidated PAT at INR13b in
FY13E (down 36% YoY) and INR10b in FY14E (down 14% YoY). Neutral.

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