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MOSL: TATA POWER (Neutral)-Hit by higher cost at coal JVs and Mundra

Tata Power: Hit by higher cost at coal JVs and Mundra; HPC recommendations can provide relief; Maintain Neutral

(TPWR IN, Mkt Cap USD2.7b, CMP INR71, TP INR69, 3% Downside, Neutral)

 

Tata Power (TPWR) reported a loss of INR1.1b on a consolidated basis in 3QFY19, as against a profit of INR2.7b in the previous quarter and our estimate of INR2.9b. The performance was dragged by a higher-than-expected cost increase, lower realization at the coal JV, and a rise in under-recoveries at Mundra. PAT is adjusted for an INR2.7b gain on deferred tax reversal and an INR0.3b loss from discounted operations. Operational performance (EBITDA and PAT of JV companies) was dismal, declining 13% QoQ to INR17.2b (our estimate: INR19.2b).

• Mundra (EBITDA) and coal JVs (PAT) declined 64% QoQ. The hedge between the two was impacted by a sharp increase in COGS, lower realization at coal JVs due to mix, Indonesia's DMO impact, and some one-offs. Mundra under-recoveries increased INR0.13/kWh QoQ to INR0.95/kWh.
• Distribution: Mumbai EBITDA (proxy standalone) was steady QoQ, while Delhi's PAT increased 68% QoQ, aided by consultancy income. Regulated equity was broadly flat QoQ in both the circles.
• RE (ex-standalone): EBITDA increased 20% YoY (-11% QoQ) to INR4.3b, led by a 20% YoY increase in generation. PAT, however, declined 9% YoY to INR0.5b due to higher interest cost and tax rate.
• Net debt decreased by INR16.9b to INR483b in 9MFY19.