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India Power
June-q earnings preview: fuel and execution delays
impacting growth
TPWR and Adani likely growth leaders, with coal prices and plantstarts
the growth drivers, respectively: We see TPWR’s PAT growth at
31% YoY due to better coal price realization from Indonesian mines and a
stable performance in its regulated businesses. We see Adani’s growth at
67% YoY, as effective capacity has multiplied (Mundra-3-1 660MW in
March, 2nd one synchronized). On a qoq basis, though, Adani’s growth at
10% may look a bit muted due to lower PLF in June, attributed to: a) grid
restrictions b) maintenance shut down of the 1st 330MW unit and c) shut
down of the 660MW for a few days for synchronization of Unit 2. We also
expect JPVL to clock 16% PAT growth, due to commissioning of first
250MW unit of Karcham Wangtoo, which was selling power at short-term
rates.
Regulated govt. utilities: PWGR PAT to grow a modest 6% yoy, as
capitalizations (or additions to gross block) were lower than expected in
Mar-q. We estimate NTPC’s profit growth at 18% yoy, due to the growth in
capacity (2GW) and base effect. 1QFY11 PAT de-grew 16% owing to
under-recovery of fixed charges in 3 coal based plants of ~4.65GW.
On the other hand, the rest of the sector is likely to witness profit declines
due to a mix of issues: Lanco’s reported profit will continue to be impacted
by construction profit elimination, and weak PLFs owning to transmission
bottlenecks and unremunerative realizations at Amarkantak-II (300MW).
We expect JSW Energy to see >50% profit decline YoY, despite the
commissioning of Ratnagiri (300MW) unit in June-q: this is due to lower
PLF stemming from imported coal based merchant plants facing backdowns
from SEBs (69% est. PLF in Jun-q vs. 88% in Mar-q). RPWR profit decline
is mainly due to our lower financial income estimate: we however expect
strong EBITDA growth on improved operational performance. For RELI,
the profit decline is owing to higher capital costs, lower other income and
profit from RPWR, even though construction revenue may have picked up.
With this kind of performance, we do not see investor appetite
returning soon for the sector. Concerns on fuel, execution and cost of
funds will remain overhangs, in our view. We maintain our preference for
Adani and TPWR, which are expected to show strong growth amidst sector
concerns, and for Powergrid Corp which is less vulnerable to fuel concerns.
Table 4: India Power and Infra: Key assumptions and earnings outlook for 1QFY12 and FY12
Company 1QFY12 FY12
Adani Power
We estimate Adani to report a PAT of Rs1.9B up 10% qoq and
67% yoy. Despite commissioning of the first 660MW unit in
March, generation is up only 6% qoq as the June month PLF was
only 52% attributed to a) grid restrictions b) maintenance shut
down of the 1st 330MW unit and c) shut down of the 660MW for a
few days for synchronization of Unit 2.
We expect 2.8GW to be operational in FY12 vs. 1GW in FY11.
Consequently we estimate a PAT of Rs19.7B. Increased fuel
prices due to the policy change in Indonesia and lower PLFs
are key risks to our estimates.
JSW Energy
Expect another weak quarter for JSW with a PAT decline of 32%
qoq and 53% yoy to Rs1.4B. We est. a PLF 69% vs. 88% in 4Q.
Despite the commissioning of a 300MW unit at Ratnagiri in June,
we expect generaltion to be down ~14% qoq due to low PLFs at
Vijaynagar and Barmer. With lower merchant rates and increasing
fuel costs we estimate a large margin squeeze on a yoy basis.
We expect the merchant rate to decline in FY12, but stay
above peers (Rs4.3 vs. Rs4 for the sector and Rs4.95 in
FY11) given JSW’s presence in deficit states. Our PAT
estimate of Rs10.1B (up 16% yoy) is at risk due to further
delays in commissioning of Barmer (est. PAT Rs1.4B) and
increase in fuel costs.
Lanco
With the new depreciation policy in place we expect Lanco to
report a PAT of Rs1B in 1QFY12. On a qoq basis we expect
EBITDA to increase 41% qoq, since last quarter margins were
depessed (8.5% EBIT mgn, JPM est for 1QFY12 10%) in the
construction segment and execution was slow. PLF although low
was improved compared to the previous quarter for Amartkantak
and Kondapalli.
With a more favourable depreciation policy we expect Lanco
to report a PAT of Rs8.1B in FY12. Consolidation of Anpara
and Udupi will be only in the 2H of the year contributing
Rs2.7B to the consol EBITDA of Rs30.5B. EBITDA growth of
60% yoy is driven by pick up in contruction revenues and
increase inmargin to 10% vs 6% last year.
NTPC
Based on CEA data we expect net generation to be down 2% yoy
and down 6% qoq, fuel availability being the key issue. We expect
PAT of Rs21.7B up 18% yoy (due to capacity addditions) but
down 22% qoq (4Q was much higher due to accounting
adjustments). Also 1QFY11 was a lower base on account of
under recovery of fixed tariff for Kahalgaon and Farakka.
We model NTPC to have 32.6GW of operational capacity in
FY12 up 6% yoy translating into PAT growth of 4.6% yoy. The
company is not catching up on its past slip-ups in FY12; rather
we think it’s a FY13 event.
RELI
We expect some pick up in execution of projects resulting in a
13% yoy growth in topline. However with lower other income and
associate profits from RPWR (which had a tax credit in 4Q), we
expect PAT decline of 17% yoy and 24% qoq to Rs3.1B. We
model a 10% margin for the construction business.
After a 9.5% decline in EPC segment revenue (Rs~30bn) in
FY11, management guided to at least doubling’ of topline
(JPM est Rs60.7B) in FY12, as projects reach an inflection
point in execution. We model EPC EBIT margin of 6.3% vs.
8.1% in FY12; management has guided to stable margins.
Commissioning of infra projects leads to 21% growth in topline
and 41% yoy growth in EBITDA. However increased capital
costs translates into a flat PAT of Rs15.7B.
Reliance Power
Rosa (600MW) had strong operating quarter, with 91% PLF vs.
87% in 4Q. While we expect EBITDA to be up 6% qoq and PBT
to be flat. Our PAT estimate of Rs1.26B does not incorproate the
benefit of any tax credits which the company got in 4QFY11
(Rs323M).
We expect Rosa 2 to become operational towards the end of
FY12. With a full year of operation of Rosa 1 at improved
availability and commissioning of Rosa 2 we estimate FY12
EBITDA of Rs5.5B vs Rs2.5B in FY11. However accounting
conservatively for lower other income, our PAT estimate of
Rs5.2B is down 36% yoy.
Tata Power
We expect PAT to grow ~31% yoy to ~Rs6.1B, on account of
better realizations for coal mining. Sequentially we expect PAT to
be down 8%, due to seasonal impact of rains.
In FY12 we expect a PAT growth of 24% yoy with the
commissioning of Maithon (1,050MW) and improved pricing
outlook for coal mines.
Powergrid
In Mar-q capitalization had been quite weak and according to
management there was a spill over to FY12. We estimate a
moderate growth of 6.3% YoY in Jun-q and would watch out for
management commentary on capex and capitalization.
We estimate around ~Rs98bn of asset capitalization and
Rs145bn capex in FY12, which translates into ~11.4% PAT
growth.
JPVL
JPVL has commissioned 2x250MW of Karcham Wangtoo in Junq
and is selling power in the ST market at blended realization of
~Rs3.9/unit as per management (249MU generated in Jun-q). We
estimate Rs564mn PAT (up 16% YoY) in Jun-q, higher than
expected depreciation on recently commissioned units of KW
could result in downside to our estimate.
Still await final judgment on project cost approval for KW. In
base case, we assume the revised project cost is approved
and PPA: merchant is 80:20. Downside arises from
disapproval of cost escalation, while upside could arise if the
company succeeds in carving out a higher merchant
component while renegotiating the PPA.
GMR
We espect GMR to report a loss of Rs743M in 1QFY12 compared
to a loss of Rs678M in 4Q, as DIAL capital costs continue to
impact the bottom line despite improvement in power generation
volumes.
We expect Male, Hyderabad airport and the power segment to
be the profit making SBUs. We estimate PAT of Rs1.1B in
FY12.
GVK
GVK PAT to improve to Rs474M up 29% qoq and up 42% yoy.
According to CEA, generation volumes are up ~10% qoq.
Our FY12 consolidated PAT estimate of Rs1.4B (down 10%
yoy) incorporates MIAL as a wholly owned sub translating into
higher capital costs. Also we assume no increase in aero
charges.
Source: J.P. Morgan estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Power
June-q earnings preview: fuel and execution delays
impacting growth
TPWR and Adani likely growth leaders, with coal prices and plantstarts
the growth drivers, respectively: We see TPWR’s PAT growth at
31% YoY due to better coal price realization from Indonesian mines and a
stable performance in its regulated businesses. We see Adani’s growth at
67% YoY, as effective capacity has multiplied (Mundra-3-1 660MW in
March, 2nd one synchronized). On a qoq basis, though, Adani’s growth at
10% may look a bit muted due to lower PLF in June, attributed to: a) grid
restrictions b) maintenance shut down of the 1st 330MW unit and c) shut
down of the 660MW for a few days for synchronization of Unit 2. We also
expect JPVL to clock 16% PAT growth, due to commissioning of first
250MW unit of Karcham Wangtoo, which was selling power at short-term
rates.
Regulated govt. utilities: PWGR PAT to grow a modest 6% yoy, as
capitalizations (or additions to gross block) were lower than expected in
Mar-q. We estimate NTPC’s profit growth at 18% yoy, due to the growth in
capacity (2GW) and base effect. 1QFY11 PAT de-grew 16% owing to
under-recovery of fixed charges in 3 coal based plants of ~4.65GW.
On the other hand, the rest of the sector is likely to witness profit declines
due to a mix of issues: Lanco’s reported profit will continue to be impacted
by construction profit elimination, and weak PLFs owning to transmission
bottlenecks and unremunerative realizations at Amarkantak-II (300MW).
We expect JSW Energy to see >50% profit decline YoY, despite the
commissioning of Ratnagiri (300MW) unit in June-q: this is due to lower
PLF stemming from imported coal based merchant plants facing backdowns
from SEBs (69% est. PLF in Jun-q vs. 88% in Mar-q). RPWR profit decline
is mainly due to our lower financial income estimate: we however expect
strong EBITDA growth on improved operational performance. For RELI,
the profit decline is owing to higher capital costs, lower other income and
profit from RPWR, even though construction revenue may have picked up.
With this kind of performance, we do not see investor appetite
returning soon for the sector. Concerns on fuel, execution and cost of
funds will remain overhangs, in our view. We maintain our preference for
Adani and TPWR, which are expected to show strong growth amidst sector
concerns, and for Powergrid Corp which is less vulnerable to fuel concerns.
Table 4: India Power and Infra: Key assumptions and earnings outlook for 1QFY12 and FY12
Company 1QFY12 FY12
Adani Power
We estimate Adani to report a PAT of Rs1.9B up 10% qoq and
67% yoy. Despite commissioning of the first 660MW unit in
March, generation is up only 6% qoq as the June month PLF was
only 52% attributed to a) grid restrictions b) maintenance shut
down of the 1st 330MW unit and c) shut down of the 660MW for a
few days for synchronization of Unit 2.
We expect 2.8GW to be operational in FY12 vs. 1GW in FY11.
Consequently we estimate a PAT of Rs19.7B. Increased fuel
prices due to the policy change in Indonesia and lower PLFs
are key risks to our estimates.
JSW Energy
Expect another weak quarter for JSW with a PAT decline of 32%
qoq and 53% yoy to Rs1.4B. We est. a PLF 69% vs. 88% in 4Q.
Despite the commissioning of a 300MW unit at Ratnagiri in June,
we expect generaltion to be down ~14% qoq due to low PLFs at
Vijaynagar and Barmer. With lower merchant rates and increasing
fuel costs we estimate a large margin squeeze on a yoy basis.
We expect the merchant rate to decline in FY12, but stay
above peers (Rs4.3 vs. Rs4 for the sector and Rs4.95 in
FY11) given JSW’s presence in deficit states. Our PAT
estimate of Rs10.1B (up 16% yoy) is at risk due to further
delays in commissioning of Barmer (est. PAT Rs1.4B) and
increase in fuel costs.
Lanco
With the new depreciation policy in place we expect Lanco to
report a PAT of Rs1B in 1QFY12. On a qoq basis we expect
EBITDA to increase 41% qoq, since last quarter margins were
depessed (8.5% EBIT mgn, JPM est for 1QFY12 10%) in the
construction segment and execution was slow. PLF although low
was improved compared to the previous quarter for Amartkantak
and Kondapalli.
With a more favourable depreciation policy we expect Lanco
to report a PAT of Rs8.1B in FY12. Consolidation of Anpara
and Udupi will be only in the 2H of the year contributing
Rs2.7B to the consol EBITDA of Rs30.5B. EBITDA growth of
60% yoy is driven by pick up in contruction revenues and
increase inmargin to 10% vs 6% last year.
NTPC
Based on CEA data we expect net generation to be down 2% yoy
and down 6% qoq, fuel availability being the key issue. We expect
PAT of Rs21.7B up 18% yoy (due to capacity addditions) but
down 22% qoq (4Q was much higher due to accounting
adjustments). Also 1QFY11 was a lower base on account of
under recovery of fixed tariff for Kahalgaon and Farakka.
We model NTPC to have 32.6GW of operational capacity in
FY12 up 6% yoy translating into PAT growth of 4.6% yoy. The
company is not catching up on its past slip-ups in FY12; rather
we think it’s a FY13 event.
RELI
We expect some pick up in execution of projects resulting in a
13% yoy growth in topline. However with lower other income and
associate profits from RPWR (which had a tax credit in 4Q), we
expect PAT decline of 17% yoy and 24% qoq to Rs3.1B. We
model a 10% margin for the construction business.
After a 9.5% decline in EPC segment revenue (Rs~30bn) in
FY11, management guided to at least doubling’ of topline
(JPM est Rs60.7B) in FY12, as projects reach an inflection
point in execution. We model EPC EBIT margin of 6.3% vs.
8.1% in FY12; management has guided to stable margins.
Commissioning of infra projects leads to 21% growth in topline
and 41% yoy growth in EBITDA. However increased capital
costs translates into a flat PAT of Rs15.7B.
Reliance Power
Rosa (600MW) had strong operating quarter, with 91% PLF vs.
87% in 4Q. While we expect EBITDA to be up 6% qoq and PBT
to be flat. Our PAT estimate of Rs1.26B does not incorproate the
benefit of any tax credits which the company got in 4QFY11
(Rs323M).
We expect Rosa 2 to become operational towards the end of
FY12. With a full year of operation of Rosa 1 at improved
availability and commissioning of Rosa 2 we estimate FY12
EBITDA of Rs5.5B vs Rs2.5B in FY11. However accounting
conservatively for lower other income, our PAT estimate of
Rs5.2B is down 36% yoy.
Tata Power
We expect PAT to grow ~31% yoy to ~Rs6.1B, on account of
better realizations for coal mining. Sequentially we expect PAT to
be down 8%, due to seasonal impact of rains.
In FY12 we expect a PAT growth of 24% yoy with the
commissioning of Maithon (1,050MW) and improved pricing
outlook for coal mines.
Powergrid
In Mar-q capitalization had been quite weak and according to
management there was a spill over to FY12. We estimate a
moderate growth of 6.3% YoY in Jun-q and would watch out for
management commentary on capex and capitalization.
We estimate around ~Rs98bn of asset capitalization and
Rs145bn capex in FY12, which translates into ~11.4% PAT
growth.
JPVL
JPVL has commissioned 2x250MW of Karcham Wangtoo in Junq
and is selling power in the ST market at blended realization of
~Rs3.9/unit as per management (249MU generated in Jun-q). We
estimate Rs564mn PAT (up 16% YoY) in Jun-q, higher than
expected depreciation on recently commissioned units of KW
could result in downside to our estimate.
Still await final judgment on project cost approval for KW. In
base case, we assume the revised project cost is approved
and PPA: merchant is 80:20. Downside arises from
disapproval of cost escalation, while upside could arise if the
company succeeds in carving out a higher merchant
component while renegotiating the PPA.
GMR
We espect GMR to report a loss of Rs743M in 1QFY12 compared
to a loss of Rs678M in 4Q, as DIAL capital costs continue to
impact the bottom line despite improvement in power generation
volumes.
We expect Male, Hyderabad airport and the power segment to
be the profit making SBUs. We estimate PAT of Rs1.1B in
FY12.
GVK
GVK PAT to improve to Rs474M up 29% qoq and up 42% yoy.
According to CEA, generation volumes are up ~10% qoq.
Our FY12 consolidated PAT estimate of Rs1.4B (down 10%
yoy) incorporates MIAL as a wholly owned sub translating into
higher capital costs. Also we assume no increase in aero
charges.
Source: J.P. Morgan estimates.
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