MOSL: TORRENT POWER (Buy)-Growth across segments barring Sugen
TORRENT POWER: Growth across segments barring Sugen
(TPW IN, Mkt Cap USD2b, CMP INR296, TP INR351, 19% Upside, Buy)
EBITDA increased 9% YoY to INR8.3b (our estimate: INR8.1b) in 1QFY20, led by (a) increased merchant power sales, (b) higher renewable generation and (c) investments in the distribution license business. However, the gains from these segments were partly offset by the impact from the new CERC regulations on Sugen. PAT was up 22% YoY to INR2.8b (our estimate: INR2.4b), led by a lower tax rate of 14% (1QFY19: 21%).
- UnoSugen (PLF: 42%) and DGEN (PLF: 10%) benefitted from the sale of power in the merchant market. In contrast, both these plants were idle in 1QFY19. Including Sugen, the company sold 788MUs in the merchant market (1QFY19: 77MUs), leading to an incremental benefit of ~INR400m.
- PLFs for TPW's wind/solar business also improved 125bp/70bp YoY.
- Profitability for Sugen, though, was impacted by the new CERC regulations, which has tightened O&M norms and increased sharing on efficiency gains.
- UnoSugen has started supplying power under an LT PPA since 1st Jul'19. We expect UnoSugen to generate EBITDA of ~INR1.7b per annum.
- The company noted that its 500MW SECI-III project is facing execution issues. If the project does not go through, it would lead to a penalty of INR1.5b.
Torrent Power Limited is a holding company. The Company is an integrated utility engaged in the business of power generation, transmission and distribution with operations in the states of Gujarat, Maharashtra and Uttar Pradesh. It is also engaged in the business of cables manufacturing with operations in the state of Gujarat. It has an aggregate generating capacity of approximately 3,334 megawatts (MW). The Company's generation facilities include an approximately 1,147.5 MW SUGEN Mega Power Plant near Surat; an over 382.5 MW UNOSUGEN Power Plant near Surat; an approximately 1,200 MW DGEN Power Plant at Dahej SEZ near Bharuch; an approximately 422 MW AMGEN Power Plant at Ahmedabad; an approximately 49.6 MW Wind Power Plant at Lalpur, Jamnagar; an approximately 51 MW Solar Power Plant at Charanka, Patan, and an approximately 81 MW GENSU Solar Power Plant near Surat. The Company distributes approximately 10 billion units of power to over 2.2 million customers.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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