MOSL: TATA POWER (Sell)- Higher coal prices, RE and Maithon drive PAT growth

​Tata Power:Higher coal prices, RE and Maithon drive PAT growth; Maintain Sell

(TPWR IN, Mkt Cap USD3.5b, CMP INR85, TP INR72, 15% Downside, Sell)

• Tata Power’s (TPWR) 2QFY18 adj. consolidated PAT grew 14% YoY to INR3.8b (est. INR3.6b). The PAT is adjusted for exceptional charge of INR1.5b pertaining to Tata Teleservices and impairment of Rithala plant. The growth was driven by net benefit (Mundra & Coal) of higher coal prices, RE and higher generation at Maithon.
  
• Mundra+Coal: The under-recovery at Mundra was down from INR0.93/kWh in 1Q to INR0.70/kWh on higher availability (85% vs. 61% in 1Q) and savings in fuel coal. FoB cost of coal was unchanged QoQ (at USD59/t). Coal mining JVs PAT was up ~19% QoQ (6.5x YoY) to INR3.3b on higher coal prices. Mundra EBITDA + Coal JVs and logistics PAT (hedge) was up 72% QoQ / 37% YoY to INR5.1b.
  
• RE (ex-standalone): Capacity was up 25MW QoQ to 1,601MW. Generation was down 12% QoQ to 610MU, 2Q being a seasonally weak quarter. EBITDA was thus down 13% QoQ to INR4.1b.
  
• Other businesses: Maithon PAT grew 28% YoY to INR680m on higher generation. Interest cost has declined 180bps on refinancing, but it is pass-through in tariffs. Delhi distribution PAT was impacted by impairment at Rithala plant. Delhi’s regulated equity was down 2% YoY to INR12.2b as growth capex is offset by recovery of regulatory assets (-11% YoY). Mumbai’s regulated equity was up 4% YoY to INR38.1b.