Adani Transmission's Q4FY18 results (Underperformer) - Inline Quarter
Q4FY18 results
- Adani Transmission reported EBITDA of Rs4.9bn (est of Rs5.1bn), +6% yoy while profit for the quarter was Rs1.5bn (est of Rs1.4bn), + 58% yoy. FY18 EBITDA and PAT was Rs14.7bn and Rs11.4bn led by the favourable tariff order for Mundra Mohindergarh. The total incremental revenues from the order for past period is Rs8.7bn. Adjusting for past period income and acquisition expenses, FY18 profit was Rs4.5bn
- Acquisition of Reliance Infra - WRSS assets was completed in Q3FY18 while PÄrbati Koldam transmission assets (76% - Reliance Infra and 24% - Power Grid) is yet to be concluded pending approval from Power Grid Board.
- Adani Transmission has paid an advance of Rs26bn to Reliance Infra for the acquisition of Mumbai DiSCOM. Out of Rs26bn, Adani Transmission raised Rs18.5bn of unsecured perpetual securities from the promoters. Earlier, Adani Transmission had entered into share purchase agreement with Reliance Infra to buy its Mumbai distribution business at an enterprise value of Rs121bn. Transaction is likely to be funded by Rs85bn of debt and Rs36bn of equity and equity linked instruments. The acquisition is likely to be finalised by Q1/Q2FY19
- Total capital expenditure under TBCB projects is Rs40bn. Out of which, Rs27bn has been spent till date (equity of Rs9.7bn)
Key positives: Higher availability of transmission assets; Won a TBCB projects of Rs5bn
Key negatives: Expensive acquisition of Reliance Infra Mumbai DISCOM
Impact on financials: We downgrade our earnings estimates for FY19E/FY20E by 13%/1% to as we factor in new timeline for acquisition of Mumbai DISCOM (Oct 2018 vs earlier assumption of April 2018)
Valuations & view
We expect FY18-20E EBITDA and earnings CAGR to be 33% and 43% respectively, led by favourable order for Tiroda Aurangabad assets, commissioning of new assets, acquisition of assets (including Reliance Infra Mumbai DISCOM) and refinancing-led interest cost savings. Given the rich valuations (20.4x FY20E earnings and 3.2x FY20E book value), we maintain underperformer rating with a TP of Rs113/share (our price factors in new project win of Rs40-50bn per annum, and assumes an attractive return on all assets under acquisition and all bid assets under execution). The key risk to our call is ATL winning new transmission bids of large sizes
Adani Transmission Limited. Adani Transmission Limited is a holding company. The Company operates as a power transmission company. It is engaged in transmission of electric energy and trading of castor oil. It owns, operates and maintains approximately 5,050 circuit kilometers of transmission lines, ranging from 400 kilovolts to 765 kilovolts, with a total transformation capacity of over 12,000 megavolt ampere (MVA). The Company has four operational Transmission Systems that primarily serve the Northern and Western regions of India, and additional projects of approximately 1,700 circuit kilometers in Rajasthan, Chhattisgarh, Madhya Pradesh and Maharashtra under construction. Its projects under utilities include Mundra-Mohindergarh Transmission Line, Mundra-Dehgam Transmission Line and Tiroda-Warora Transmission Line. Its engineering, procurement and construction projects include Mundra-Zerda Transmission Line, Nalia-Bitta Transmission Line, Kawai-Chhabra Transmission Line and Shantigram-Transmission Network.
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