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Hope belies reality. Adani Power’s resilient stock performance reflects optimism on (1) value accretion from asset acquisitions, and (2) potential wins from coal auctions. However, it does not fully reflect continued losses despite accrual of compensatory tariffs, declining prices of imported coal and reasonable plant utilization. Maintain SELL with a revised price target of `40/share (from `36) primarily to factor the benefit of declining prices of imported coal.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
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Improved generation and lower interest cost help contain standalone losses Adani Power’s standalone revenue (`30 bn, up 22% yoy, 26% qoq) was in line with our estimate of `30 bn, EBITDA (`7.2 bn, up 32% yoy, 9% qoq) was lower than our estimate of `8.9 bn, and net losses of `1.7 bn were lower than our estimate of `2 bn. Earnings performance improved mainly due to higher generation of 8.8 BU (88% PLF) during the quarter compared with 6 BU in 2QFY15 and 8 BU in 3QFY14. However, only a marginal decline in per-unit fuel cost compared with the 10% sequential decline that we factored led to a miss in EBITDA estimates. Lower depreciation and interest cost (because of a transfer of transmission assets to a wholly owned subsidiary) compensated for the miss at the EBITDA level, resulting in lower-than-expected losses of `1.7 bn. Reported profits of `537 mn include exceptional gains of `2.2 bn because of transfer of transmission assets to the wholly owned subsidiary. Consolidated earnings benefit from improved generation, lower fuel cost APL reported consolidated revenues of `55 bn (42% yoy, 33% qoq), EBITDA of `18 bn (79% yoy, 44% qoq) and net loss of `4 bn on a net generation of 14.7 BU, implying average tariffs of `3.7/kwh and a fuel cost of `2.2/kwh. Consolidated generation implies a PLF of 78% on an expanded capacity base of 9.2 GW. APL has a consolidated gross debt of `423 bn as of September 2014 (`398 bn in March 2014). Its financial performance is dismal despite the accrual of `4.5 bn (`0.3/kwh) of compensatory tariff during the quarter, comprising `2.6 bn for Mundra, `1.4 bn for Tiroda and `0.5 bn for Kawai. The Supreme Court has put a stay on payment of compensatory tariff pending the conclusion of a hearing at the Appellate Tribunal for Electricity. Maintain SELL with a revised price target of `40/share We maintain our SELL rating with a target price of `40/share (`36/share previously) to factor sustainable decline in prices of imported coal. APL has not been able to meaningfully improve its financial performance despite accounting for compensation of `4.5 bn on a consolidated basis for the quarter and improved utilization rates of 78%, leaving room for improvement in its financial performance with declining prices of imported coal.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily29012015tg.pdf
Hope belies reality. Adani Power’s resilient stock performance reflects optimism on (1) value accretion from asset acquisitions, and (2) potential wins from coal auctions. However, it does not fully reflect continued losses despite accrual of compensatory tariffs, declining prices of imported coal and reasonable plant utilization. Maintain SELL with a revised price target of `40/share (from `36) primarily to factor the benefit of declining prices of imported coal.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
Improved generation and lower interest cost help contain standalone losses Adani Power’s standalone revenue (`30 bn, up 22% yoy, 26% qoq) was in line with our estimate of `30 bn, EBITDA (`7.2 bn, up 32% yoy, 9% qoq) was lower than our estimate of `8.9 bn, and net losses of `1.7 bn were lower than our estimate of `2 bn. Earnings performance improved mainly due to higher generation of 8.8 BU (88% PLF) during the quarter compared with 6 BU in 2QFY15 and 8 BU in 3QFY14. However, only a marginal decline in per-unit fuel cost compared with the 10% sequential decline that we factored led to a miss in EBITDA estimates. Lower depreciation and interest cost (because of a transfer of transmission assets to a wholly owned subsidiary) compensated for the miss at the EBITDA level, resulting in lower-than-expected losses of `1.7 bn. Reported profits of `537 mn include exceptional gains of `2.2 bn because of transfer of transmission assets to the wholly owned subsidiary. Consolidated earnings benefit from improved generation, lower fuel cost APL reported consolidated revenues of `55 bn (42% yoy, 33% qoq), EBITDA of `18 bn (79% yoy, 44% qoq) and net loss of `4 bn on a net generation of 14.7 BU, implying average tariffs of `3.7/kwh and a fuel cost of `2.2/kwh. Consolidated generation implies a PLF of 78% on an expanded capacity base of 9.2 GW. APL has a consolidated gross debt of `423 bn as of September 2014 (`398 bn in March 2014). Its financial performance is dismal despite the accrual of `4.5 bn (`0.3/kwh) of compensatory tariff during the quarter, comprising `2.6 bn for Mundra, `1.4 bn for Tiroda and `0.5 bn for Kawai. The Supreme Court has put a stay on payment of compensatory tariff pending the conclusion of a hearing at the Appellate Tribunal for Electricity. Maintain SELL with a revised price target of `40/share We maintain our SELL rating with a target price of `40/share (`36/share previously) to factor sustainable decline in prices of imported coal. APL has not been able to meaningfully improve its financial performance despite accounting for compensation of `4.5 bn on a consolidated basis for the quarter and improved utilization rates of 78%, leaving room for improvement in its financial performance with declining prices of imported coal.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily29012015tg.pdf
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