Tata Power Company Ltd. share price target

29 October 2018 Tata Powers (TPWR) 2QFY19 consol. PAT declined 28% YoY (+25% QoQ) to prior-period revenue of ~INR0.9b, net of loss on discontinued operations of ~INR0.3b. Operational performance (EBITDA and PAT of JV companies) was in line. increased 25% QoQ to INR4.1b, driven by INR depreciation, higher coal prices and savings from blending of low-GCV coal at Mundra. Indonesias DMO obligation impacted coal JVs PAT by ~INR0.6b. Cost of production in coal JVs is rising, which could offset gains from higher prices. Regulatory assets declined by ~5% QoQ to INR41b, aiding working capital improvement in Delhi. RE EBITDA increased 8% YoY (-7% QoQ) to INR4.6b, driven by an increase in generation by 34% YoY.

Underlying earnings (that is, PBT before exceptional and other income, but including PAT of JVs and associates) grew ~8% in FY18. The benefit of higher coal prices (net) and almost doubling of renewable energy (RE) business was largely offset by higher finance cost. Finance cost increased due to leveraged acquisition of RE business from Welspun (was for part of the year in FY17) and FX loss

Consolidated revenue grew by 16% YoY to Rs71.4bn vs. Rs61.6bn, while PAT quadrupled to Rs17.3bn vs. Rs4bn. CGPL's loss rose to Rs4.3bn from Rs3bn in 1QFY18 on higher fuel cost and Rs0.98bn MTM loss led by INR depreciation. However, CGPL's revenue rose by 19% YoY to Rs15.3bn on higher realisation (at Rs2.7/unit vs. Rs2.3/unit in 1QFY18) & improved PLF (66% vs. 59% in 1QFY18). Despite 3.5% YoY decline in coal sales to 13.9mnT, net realisation FOB remained flat at US$64.8/tonne, while gross profit declined to US$19.8/tonne from US$22.8/tonne in...

6 June 2018 Over the last year, TPWR has accelerated the pace of sale of non-core assets. The reported consolidated net debt to equity will decline from 2.7x in FY17 to 2.3x post divestments. TPWR is also evaluating the performance of its overseas power assets for possible consolidation/monetization. CGPL continues engaging beneficiaries for a sustainable resolution of partial under- recovery of fuel cost. CGPL is optimizing fuel cost by blending of low GCV coal, which is available at a steeper discount. CGPL is also in discussion with DISCOMs to sell power beyond minimum commitment of 80% at merchant tariff. The regulated PPA for the Trombay power plant with BEST is valid until March 2019 (after the recent extension by one year). BEST is seeking competitive bids, but, based on the initial results (two rounds have been completed), the competitive price may be higher than regulated supply by Trombay.

Mundra UMPP Continues to Incur Higher Loss; Maintain HOLD Tata Power Company (TPCL) has posted consolidated (reported) Rs14.8bn net profit in 4QFY18 vs. Rs2.3bn net loss in 4QFY17 led by exceptional gains to the tune of Rs12.4bn. Its consolidated revenue rose by 14.2% YoY to Rs78.5bn vs. Rs68.8bn in 4QFY17. However, adjusted PBT declined by 31.5% YoY to Rs2.5bn from Rs3.6bn in 4QFY17 owing to lower dividend from associate companies, higher losses at Mundra Plant (CGPL) along with higher interest and depreciation cost. Looking ahead, we believe that any meaningful upside in valuation is capped owing to near-term overhang relating to losses at CGPL. Thus, we maintain our HOLD recommendation...

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.

Consolidated net profit (reported) including Rs2.9bn gain on recognition of deferred tax assets on indexation benefit on the investments and adverse impact of tariff order in MPL of Rs960mn declined by 1.2% YoY to Rs6.1bn led by continued loss in CGPL. Standalone PAT surged by 73% YoY to Rs5.2bn mainly due to higher one-off gains of Rs1.9bn, lower loss at CGPL (Rs2.1bn vs. Rs 2.4bn in 3QFY17) despite higher coal prices and higher contribution from coal business at Rs3.3 bn (vs. Rs 2.2 bn in 3QFY17). Profit from renewable portfolio surged to Rs720mn from Rs140mn in 3QFY17, off-set by Rs310mn loss at Maithon (vs. Rs740mn profit in 3QFY17) and lower PAT of...

Q3 PAT at Rs 6.3 bn beat our estimate of Rs 5.7 bn mainly due to lower-than-expected losses at Mundra UMPP on improving operational metrics. Up-to-mark performance by coal companies (EBITDA up 55% YoY) helped to partially offset Mundra losses and one-off at Maithon plant.