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MOSL: TATA POWER (Neutral) - Consolidated adjusted PAT below estimate led by poor performance of Maithon, standalone business




Motilal Oswal Securities Ltd.


13 Aug 2014





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TATA POWER 1QFY15: Consolidated adjusted PAT below estimate led by poor performance of Maithon, standalone business; Cut FY15E earnings by ~10% (TPWR IN, Mkt Cap USD4.8b, CMP INR91, TP INR96, 5% upside, Neutral) 1QFY15 adjusted performance below estimate: Tata Power reported consolidated PAT loss of INR1.1b. This compares with our estimate of PAT of INR3.9b, as we were factoring in benefit of compensatory tariff (INR2.24b in 1Q). Management has deemed it fit to delay the booking till the final clarity emerges on the matter. Adjusted for the same and forex loss of INR1.4b, the PAT should be INR2.5b. This is lower due to lower contribution from standalone business and Maithon power project. Mining SPV performance largely in-line: Mining companies reported production of 22.6m tons (up 4.6% QoQ, 10% YoY), while Sales stood at 21.7m tons (up 9% YoY). Realisation stood at USD47/ton, vs USD66/ton YoY, while production cash cost moderated to USD32/ton, vs USD42/ton YoY and USD35/ton QoQ. Reported EBIT stood at INR2.6b, vs our estimate of INR2.1b. Performance of other SPVs: Maithon project performance was lower with PAT at INR190m, vs estimate of INR579m. Key reason for lower performance was change in regulation leading to lower incentives. Mundra UMPP losses stood at INR3.1b, as company did not account for compensatory tariff. Tata Power Delhi Distribution (TDPPL, 51% stake) reported PAT of INR1b v/s INR847m YoY. Power links Transmission (51% stake) reported PAT of INR260m, vs estimate of INR290m. Tata Power Trading Company (100% stake) reported PAT of INR80m, vs INR120m YoY. Valuation and view: We lower FY15 earnings by ~10% and expect consolidated PAT at INR13.9b in FY15E, up 79% YoY and INR17.3b in FY16E (up 25% YoY) taking benefit of compensatory tariff. Stock trades at PER of 14.2x and P/B of 1.5x (RoE of 7.4%) on FY16E basis. Neutral.

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