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Tata Power Company (TTPW.BO)
Buy Equity Research
In line with expectations: clarity on Mundra yet to emerge
What surprised us
Tata Power (TTPW) reported 1QFY12 PAT of Rs 4.3 bn, in line with GS
estimate but below Bloomberg consensus estimate of Rs 5.4bn. Taxes
were higher this quarter at 50.2% vs 36.4% in 1QFY 11 due to higher taxes
in Tata Power and higher profits from coal companies. Average merchant
realizations were Rs 4.64 in Unit 8 and Rs 3.62 in Haldia vs Rs 5.41 and Rs
5.06 in 1QFY11. Coal realization increased by c.30% to $94.14/ton from
$72.45/ton last year but there was a corresponding 19% increase in costs.
In the conference call management highlighted that: 1) Unit 1 of Maithon
has been synchronized and will be commissioned shortly and it expects to
commission unit 2 by Q3 this year; 2) Unit 1 of Mundra power project is
expected to get commissioned by October 15 and Unit 2 within four
months from that; 3) management is taking every possible step to deal
with increasing coal prices including communicating with the power
ministry and use of lower grade coal without losing too much efficiency.
What to do with the stock
We maintain our Buy rating on Tata Power with a 12m SOTP based TP of
Rs 1,436. We have already reflected the losses on Mundra (about Rs
0.51/0.38/0.44/kwh for FY12E/13E/14E) in our EPS and valuation. In our
view, news flow on progress of projects under development and
construction will be key catalysts for the stock. The company will clarify
more on first year tariffs upon commissioning of the projects. Key risk:
Delay in pre-construction activities of projects under development.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power Company (TTPW.BO)
Buy Equity Research
In line with expectations: clarity on Mundra yet to emerge
What surprised us
Tata Power (TTPW) reported 1QFY12 PAT of Rs 4.3 bn, in line with GS
estimate but below Bloomberg consensus estimate of Rs 5.4bn. Taxes
were higher this quarter at 50.2% vs 36.4% in 1QFY 11 due to higher taxes
in Tata Power and higher profits from coal companies. Average merchant
realizations were Rs 4.64 in Unit 8 and Rs 3.62 in Haldia vs Rs 5.41 and Rs
5.06 in 1QFY11. Coal realization increased by c.30% to $94.14/ton from
$72.45/ton last year but there was a corresponding 19% increase in costs.
In the conference call management highlighted that: 1) Unit 1 of Maithon
has been synchronized and will be commissioned shortly and it expects to
commission unit 2 by Q3 this year; 2) Unit 1 of Mundra power project is
expected to get commissioned by October 15 and Unit 2 within four
months from that; 3) management is taking every possible step to deal
with increasing coal prices including communicating with the power
ministry and use of lower grade coal without losing too much efficiency.
What to do with the stock
We maintain our Buy rating on Tata Power with a 12m SOTP based TP of
Rs 1,436. We have already reflected the losses on Mundra (about Rs
0.51/0.38/0.44/kwh for FY12E/13E/14E) in our EPS and valuation. In our
view, news flow on progress of projects under development and
construction will be key catalysts for the stock. The company will clarify
more on first year tariffs upon commissioning of the projects. Key risk:
Delay in pre-construction activities of projects under development.
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