Tata Power reported its Q1FY17 results wherein the company adopted Ind AS accounting in Q1FY17. The same contains one-offs because of which YoY results are not comparable. Consolidated revenues were at | 6838 crore vs. | 7183 crore. Power segment revenues came in at | 6164 crore vs. our estimate of | 6362 crore. Our consolidated revenue was at | 8833 crore. Reported numbers do not include coal SPV revenues owing to stake of 30%. The same will be consolidated in JV profit. Other segment also disappointed as revenues came in at | 415 crore vs. our estimate of | 650 crore.
Valuation: Too much diversification across business and geographies leads to high flip flops across cash flows and profitability. We believe even if the compensatory tariff verdict is in favour of the company, the upside will be insignificant as it has a huge quantum of debt on the balance sheet. Even the RoEs would remain suppressed in the medium term. Hence, we are suspending our rating on the stock. We would advise investors to look for better opportunities across other power and capital goods stocks.