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Lanco reported meager profit of Rs138MM, lower than our estimate of
Rs861MM. The miss was mainly due to higher-than-usual elimination of
construction profits and severe pressures in the power business.
Lanco’s sharp profit decline in Jun-q was no different from the
trends witnessed in the past two quarters: But three issues worth
noting are: 1) the elimination of construction profit, at 80% of
construction EBIT, was high; 2) coal-based units (Amarkantak, Udupi)
have seen severe profit erosion / loss due to an unremunerative PPA and
unavailability of transmission system, respectively, while capital costs
are hitting them; and (3) the NDER, at 3.9x, has deteriorated QoQ.
The YoY comparison (PAT down 93% on a reported basis) would have
looked worse but for 1) consolidation of Griffin nos: Rs132M PAT in
Jun-q, and 2) change in depreciation methodology from WDV to
SLM. The company had recognized Rs283MM PAT from Griffin in
Mar-q, for one month since the time the transaction was completed. On a
qoq basis, the profitability of Griffin seems to have taken a hit.
Udupi reported a Rs397MM loss as sales (43% PLF) were insufficient to
absorb fixed costs and Amarkantak’s profit has been whittled down to
Rs292MM. Kondapalli (734MW) gas based unit, with a PLF of 72%
was better than 4Q (59%) owing to RLNG use during the quarter.
Despite better volumes, these units reported a qoq PAT decline owing to
lower merchant realisation.
The company’s announcement to the effect that a lawsuit by Perdaman
in Australia had been partly resolved has led to a stock rally, after the
severe price erosion over the past quarter. Given Jun-quarter
performance, we expect the stock to remain under pressure, as we do not
see a respite from power related issues in the near future.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco reported meager profit of Rs138MM, lower than our estimate of
Rs861MM. The miss was mainly due to higher-than-usual elimination of
construction profits and severe pressures in the power business.
Lanco’s sharp profit decline in Jun-q was no different from the
trends witnessed in the past two quarters: But three issues worth
noting are: 1) the elimination of construction profit, at 80% of
construction EBIT, was high; 2) coal-based units (Amarkantak, Udupi)
have seen severe profit erosion / loss due to an unremunerative PPA and
unavailability of transmission system, respectively, while capital costs
are hitting them; and (3) the NDER, at 3.9x, has deteriorated QoQ.
The YoY comparison (PAT down 93% on a reported basis) would have
looked worse but for 1) consolidation of Griffin nos: Rs132M PAT in
Jun-q, and 2) change in depreciation methodology from WDV to
SLM. The company had recognized Rs283MM PAT from Griffin in
Mar-q, for one month since the time the transaction was completed. On a
qoq basis, the profitability of Griffin seems to have taken a hit.
Udupi reported a Rs397MM loss as sales (43% PLF) were insufficient to
absorb fixed costs and Amarkantak’s profit has been whittled down to
Rs292MM. Kondapalli (734MW) gas based unit, with a PLF of 72%
was better than 4Q (59%) owing to RLNG use during the quarter.
Despite better volumes, these units reported a qoq PAT decline owing to
lower merchant realisation.
The company’s announcement to the effect that a lawsuit by Perdaman
in Australia had been partly resolved has led to a stock rally, after the
severe price erosion over the past quarter. Given Jun-quarter
performance, we expect the stock to remain under pressure, as we do not
see a respite from power related issues in the near future.
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