Reliance Power Continues to deliver on timelines; Reiterate buy ::Emkay

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Reliance Power

Continues to deliver on timelines; Reiterate buy

BUY

CMP: Rs103                                        Target Price: Rs155

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n     PAT of Rs2.35bn beat est. on other income of Rs2.6bn vs. est. of Rs1.1bn. Higher other income driven by change in a/c ing policy (+Rs700mn) and better yields (8%+ vs. 7% assumed)

n     We factor in Samalkot COD from Mar13 vs Mar12 (open cycle) earlier and adjust other income estimates – leading to 21% upgrade and 42% downgrade in FY12E/FY13E earnings

n     Building solidity - (1) huge cheap captive coal, (2) merchant capacity in captive coal plants only, (3) plants near load centers (PoC), (4) minimizing cost of capital & (5) low to reasonable tariffs - offtake and payment risk minimized 

n     Significant progress achieved. Mid-term triggers - 1) COD of 4,260MW by Dec12 (incl 1 unit of Sasan), 2) coal production in Sasan – 2Q13, 3) milestones in Tilaiya & Indonesian mines & 4) gas plant and gas supplies

n     Solidity and positive triggers ignored with valuations implying LT merchant rate of Rs1.5/unit, very safe. We foresee RPL as the most sustainable private utility; Reiterate ‘Buy’