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Q4FY11 PAT in line with estimates
CESC reported PAT of INR 1.12 bn in Q4FY11 (up 12% Y-o-Y) and INR 4.87 bn
for full year FY11, in line with our estimates (INR 1.10 bn for Q4FY11 and INR
4.85 bn for FY11). However, lower demand resulted in reduced fuel and power
purchase costs and, consequently, lower-than-expected revenues. Since the
company operates on regulated RoE, profitability is unaffected.
Operational highlights and updates
• Blended PLF of 1,225 MW of operational capacities was 88% for the quarter
versus 92% last year, on account of maintenance shutdowns and falling
peak demand resulting in lower export of power.
• The 600 MW Haldia project has in-principal approval from the regulator for
sale of 75% of its power to CESC on regulated RoE. Although the EPC bidder
has been finalised, firm orders cannot be placed pending final approval from
the regulator. The company expects the order shortly and intends to
commence work on the project from June 2011 (CoD May 2014E). The 600
MW Dhariwal project is progressing well, with CESC expecting to sign longterm
PPAs for ~50% of its capacity in the next 3-6 months (CoD April 2014E).
• The company expects coal shortages to be less acute by FY14-15 by when
its incremental capacities are expected. Moreover, it expects to blend up to
30% of imported fuel in these plants. CESC targets to have long-term
arrangements for importing 4 mn tones, of which, ~2 mn tonnes is already
tied up through its group company ICML.
Spencers Retail continues to report cash losses
Spencers Retail (Spencers) currently has cash losses of INR 110 mn/month
against ~INR 120 mn/month in Q3FY11. It expects losses of INR 1.1 bn for FY12
with an additional INR 400 mn of capex, while cash outflow (including capex) in
FY13 is expected to be ~INR 1 bn.
Outlook and valuations: Building delay in Dhariwal; maintain ‘BUY’
While CESC is yet to conclude both coal supply and PPAs for the Dhariwal
project, we have re-worked the project value assuming an average PAT of INR
0.60/kwh and project commencement from FY15. Our revised SOTP is at INR
416 (INR 446 earlier) which highlights 35% upside from current levels. Delay in
value unlocking in Spencers (leading to sustained cash infusion by CESC) has
probably triggered the fund raising plan at the power subsidiary level. Hence, we
maintain ‘BUY’ on CESC, but downgrade it to ‘Sector Underperformer’ on
relative returns basis.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q4FY11 PAT in line with estimates
CESC reported PAT of INR 1.12 bn in Q4FY11 (up 12% Y-o-Y) and INR 4.87 bn
for full year FY11, in line with our estimates (INR 1.10 bn for Q4FY11 and INR
4.85 bn for FY11). However, lower demand resulted in reduced fuel and power
purchase costs and, consequently, lower-than-expected revenues. Since the
company operates on regulated RoE, profitability is unaffected.
Operational highlights and updates
• Blended PLF of 1,225 MW of operational capacities was 88% for the quarter
versus 92% last year, on account of maintenance shutdowns and falling
peak demand resulting in lower export of power.
• The 600 MW Haldia project has in-principal approval from the regulator for
sale of 75% of its power to CESC on regulated RoE. Although the EPC bidder
has been finalised, firm orders cannot be placed pending final approval from
the regulator. The company expects the order shortly and intends to
commence work on the project from June 2011 (CoD May 2014E). The 600
MW Dhariwal project is progressing well, with CESC expecting to sign longterm
PPAs for ~50% of its capacity in the next 3-6 months (CoD April 2014E).
• The company expects coal shortages to be less acute by FY14-15 by when
its incremental capacities are expected. Moreover, it expects to blend up to
30% of imported fuel in these plants. CESC targets to have long-term
arrangements for importing 4 mn tones, of which, ~2 mn tonnes is already
tied up through its group company ICML.
Spencers Retail continues to report cash losses
Spencers Retail (Spencers) currently has cash losses of INR 110 mn/month
against ~INR 120 mn/month in Q3FY11. It expects losses of INR 1.1 bn for FY12
with an additional INR 400 mn of capex, while cash outflow (including capex) in
FY13 is expected to be ~INR 1 bn.
Outlook and valuations: Building delay in Dhariwal; maintain ‘BUY’
While CESC is yet to conclude both coal supply and PPAs for the Dhariwal
project, we have re-worked the project value assuming an average PAT of INR
0.60/kwh and project commencement from FY15. Our revised SOTP is at INR
416 (INR 446 earlier) which highlights 35% upside from current levels. Delay in
value unlocking in Spencers (leading to sustained cash infusion by CESC) has
probably triggered the fund raising plan at the power subsidiary level. Hence, we
maintain ‘BUY’ on CESC, but downgrade it to ‘Sector Underperformer’ on
relative returns basis.
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