Adani Enterprises' Q1FY20 results (Upgrade to Neutral) - Sharp jump in coal trading volumes
Q1FY20 result highlights
- Adani Enterprises’ (ADE) reported revenues of Rs106bn (est of Rs86bn) in Q1FY20, +39% yoy led by sharp jump in coal trading volumes (+61% yoy) to 18.5mt and MDO volumes (+11% yoy) to 2.4mt. Solar Module sold was 236MW (3x Q1FY19 volumes).
- Coal trading Business EBITDA increased by 46% yoy to , 108% increase in MDO to Rs3.4bn and solar EBITDA to Rs660m (vs loss of Rs300m). Overall EBITDA came in at Rs7.7bn (ahead of our estimate of Rs5bn)
- Other income was Rs1.2bn, +17% up yoy Adani Wilmar JV reported EBITDA of Rs3.5bn for Q1FY20, a growth of 11% yoy. As a result, adjusted PAT grew by 30% to Rs2.7bn (est: Rs2bn) in Q1FY20
- Reported PAT was Rs6.0bn due to exceptional income of Rs3.3bn consequent to favourable order from Supreme Court with respect to its price escalation claim in mining business.
- Coal Mining business in Australia: During the quarter, AEL has received final approval for Carmichael mine. Initial estimates of equity requirement are pegged at USD75m (balance will be funded by debt of USD400m and equipment lease of USD95m; capacity to be 15mt). Production is likely to start from June 2021.
- Airport business: Airports - AEL had won six airport bids that were invited by the Airports Authority of India. During the quarter, Cabinet has approved the leasing of three airports to company for 50 years. The airports are likely to transferred to company by April 2020
Key positives: Strong coal trading volumes in Q1FY20; Approval for Carmichael mines; opening of Gare Pelma I, II and II mines and Talaira 2&3 mines
Impact on financials: Maintain our earnings estimates
Valuations & view
ADE offers a unique combination of coal mining and coal logistics businesses. The domestic coal MDO business offers good growth potential with a large number of captive coal mines having been auctioned / allocated. AEL has won a number of bids in long gestation roads and airports business. Considering strong performance in mining and MDO business, final approval for Carmichael mine and cheap valuation (9.7xFY20E), we upgrade the stock to Neutral with SOTP based PT of Rs140.
Adani Enterprises is a global integrated infrastructure player with businesses spanning coal trading, coal mining, oil & gas exploration, ports, multi-modal logistics, power generation & transmission, gas distribution and edible oil & agro commodities. Co.'s business has three components: resources, logistics and energy. Resources means obtaining coal from mines and trading; in future it will also include oil and gas production. Logistics denotes a network of ports, SEZ and multi-modal logistics - railways and ships. Energy involves power generation & transmission and gas distribution.
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