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UBS Investment Research
Tata Power
1 Q FY12: Results below estimates
Event: 1Q FY12 PAT 5% below UBS-e
In 1Q FY12, Tata Power’s consolidated operating income grew 12% YoY to
Rs58.25bn. The reported PAT at Rs4.18bn is up 34% YoY. However, adjusted for
a) forex gain of Rs898m, and b) deferred tax of Rs550m, the recurring PAT is
Rs4.29bn, up 9% YoY. The 1Q FY12 is below UBS-e due to higher tax (higher
profits from coal business). However, the businesses are on track operationally.
Impact: Coal business has seen improved realisations in 1Q FY12
The segmental results indicate strong revenue growth in coal (29% YoY to
Rs19.9bn) and revenue in power segment grew by 6% YoY to Rs37.2bn. The PBIT
from power business has increased 21% YoY. Contribution from coal in overall
profitability has increased to 56% from 45% in Q1FY11. The company reported
30% improvement in per ton realisation for coal (US$94.14/ton in 1Q FY12).
Action: Mundra UMPP profitability remains an overhang
According to the media reports, the Indonesian government has decided to link the
price of coal exported from the country with a benchmark based on international
prices of coal. It is also likely that the new rule will be applicable retrospectively to
all contracts. Since Indonesia is the source of coal for Mundra UMPP, this could be
a major issue for the project. We think that if the spot prices are too high (above
$65-70/tonne), Mundra UMPP may not be profitable.
Valuation: Maintain Buy and PT of Rs1,600
Our SOTP based PT is contributed by, 1) Power (59%), 2) Stake in Bumi mines
(25%), 3) Investments (16%, after 20% conglomerate discount).
Tata Power
Tata Power (TPC) is an integrated utility, primarily engaged in the generation,
transmission, supply and distribution of electricity in India. As the largest
private sector generator in India by capacity, it owns an aggregate capacity of
2,379MW in the states of Maharashtra (1,870 MW), Jharkhand (428 MW) and
Karnataka (81 MW). TPC holds a 49% stake in a distribution company in Delhi,
North Delhi Power Limited (NDPL). It also has a 51% stake in Power Links, the
first public-private partnership for a transmission line. The company is
developing a 4,000MW power plant in Mundra, Gujarat.
Statement of Risk
The main risks to our valuation and price target are: 1) coal prices; 2) execution
delays; 3) currency as both coal imports and their tariffs for Mundra are linked
to the dollar/rupee rate; and 4) regulatory, as its business is spread across
multiple states.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Tata Power
1 Q FY12: Results below estimates
Event: 1Q FY12 PAT 5% below UBS-e
In 1Q FY12, Tata Power’s consolidated operating income grew 12% YoY to
Rs58.25bn. The reported PAT at Rs4.18bn is up 34% YoY. However, adjusted for
a) forex gain of Rs898m, and b) deferred tax of Rs550m, the recurring PAT is
Rs4.29bn, up 9% YoY. The 1Q FY12 is below UBS-e due to higher tax (higher
profits from coal business). However, the businesses are on track operationally.
Impact: Coal business has seen improved realisations in 1Q FY12
The segmental results indicate strong revenue growth in coal (29% YoY to
Rs19.9bn) and revenue in power segment grew by 6% YoY to Rs37.2bn. The PBIT
from power business has increased 21% YoY. Contribution from coal in overall
profitability has increased to 56% from 45% in Q1FY11. The company reported
30% improvement in per ton realisation for coal (US$94.14/ton in 1Q FY12).
Action: Mundra UMPP profitability remains an overhang
According to the media reports, the Indonesian government has decided to link the
price of coal exported from the country with a benchmark based on international
prices of coal. It is also likely that the new rule will be applicable retrospectively to
all contracts. Since Indonesia is the source of coal for Mundra UMPP, this could be
a major issue for the project. We think that if the spot prices are too high (above
$65-70/tonne), Mundra UMPP may not be profitable.
Valuation: Maintain Buy and PT of Rs1,600
Our SOTP based PT is contributed by, 1) Power (59%), 2) Stake in Bumi mines
(25%), 3) Investments (16%, after 20% conglomerate discount).
Tata Power
Tata Power (TPC) is an integrated utility, primarily engaged in the generation,
transmission, supply and distribution of electricity in India. As the largest
private sector generator in India by capacity, it owns an aggregate capacity of
2,379MW in the states of Maharashtra (1,870 MW), Jharkhand (428 MW) and
Karnataka (81 MW). TPC holds a 49% stake in a distribution company in Delhi,
North Delhi Power Limited (NDPL). It also has a 51% stake in Power Links, the
first public-private partnership for a transmission line. The company is
developing a 4,000MW power plant in Mundra, Gujarat.
Statement of Risk
The main risks to our valuation and price target are: 1) coal prices; 2) execution
delays; 3) currency as both coal imports and their tariffs for Mundra are linked
to the dollar/rupee rate; and 4) regulatory, as its business is spread across
multiple states.
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