MOSL: TATA POWER (Sell)-Higher loss at Mundra and lower coal production lead to PAT miss
TATA POWER: Higher loss at Mundra and lower coal production lead to PAT miss; Cutting estimate by 12%/1% for FY19/20; Maintain Sell
(TPWR IN, Mkt Cap USD3.5b, CMP INR87, TP INR77, 11% Downside, Sell)
Tata Power's 4QFY18 consol. adj. PAT declined 8% QoQ/30% YoY to INR2.7b (below our estimate of INR4.5b) due to higher losses at Mundra, lower coal production, and losses at some of the overseas JV companies. PAT is adjusted for (a) impairment reversal of INR18.8b, (b) impairment at Georgia Hydro of INR5.2b and (c) INR2.3b of other one-off items. Net debt (incl. perpetual securities) was unchanged YoY at INR501b. Consol. PAT increased ~3% YoY to INR14.4b for FY18.
- Coal+Mundra: PAT at its coal and logistics companies declined ~8% QoQ to INR4.2b. EBITDA at Mundra declined INR1.8b QoQ (recorded a loss of INR1b) due to higher coal prices and higher PLF. Under-recovery increased INR0.14/kWh QoQ to INR0.93/kWh at Mundra.
- Maithon: Availability improved from 61% in the previous quarter to 95% in 4QFY18, driving an INR1b QoQ increase in PAT to INR760m.
- RE (ex-standalone): EBITDA increased 32% QoQ to INR4.1b, led by higher generation. Installed capacity stood at 1.7GW (excluding 0.4GW in standalone).
Cut estimates by 12%/1% for FY19E/20E; Maintain Sell
- TPWR has entered into an agreement to sell its investment in Tata Communications and also in the strategic defence business unit (SBU). We expect the sale to be executed in FY19, generating after-tax cash inflow of INR30b. We also increase our coal price estimate from USD70/t to USD80/t. Accounting for higher losses at Mundra, excluding earnings from Tata Communications and SBU, and making other adjustments, the PAT estimate is cut by ~12%/1% to INR17.2b/INR21.1b for FY19E/20E, respectively. The revised TP is INR77/share based on SOTP (for FY20E). Sale of non-core assets will aid in faster deleveraging. However, TWPR continues lacking RoE-accretive growth opportunities. Renewable energy has potential, but is extremely competitive. Maintain Sell.
Tata Power is an integrated power utility based in India. Co. has an installed generation capacity of 8,584 MW in India and a presence in all the segments of the power sector viz. Fuel and Logistics, Generation (thermal, hydro, solar and wind), Transmission, Distribution and Trading. Co. maintains public-private partnerships in Generation, Transmission and Distribution in India. Co. is also active in renewable energy in India and has developed and fully commissioned a 4,000 MW Ultra Mega Power Project at Mundra (Gujarat) based on super-critical technology. Co.'s international presence includes strategic investments in Indonesia, Singapore, South Africa, Australia and Bhutan.
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