Tata Power Company (TPC) sprung a positive surprise in Q4FY16 with Mundra UMPP reporting a nominal profit and solar business also turning black. Despite Rs 1 billion exceptional items, consolidated PAT at Rs 3.6 billion was marginally lower than our Rs 3.9 billion estimate. APTEL has directed CERC to compute relief to be provided due to change in Indonesian coal pricing norms by July.
Meanwhile, TPC continues to eye investments in renewable space and overseas markets for growth. Owing to the delay in completion of Arutmin transaction and weak outlook on coal, we cut target price to Rs 82 (Rs 98 earlier). Maintain ‘buy’.
Good part of TPCs numbers was earnings surprise in Maithon/Mundra as well as positive contribution from solar. While Mundra UMPP reported PAT of Rs 90 million, Maithon project, riding commencement of 150MW PPA with Kerala, reported Rs 740 million PAT, which is expected to sustain going forward. Tata Solar too turned around to report Rs 40 million PAT (Rs 40 million/Rs 240 million loss in Q3FY16/Q4FY15). However, TPC’s standalone profit was lower due to Rs 2.25
billion provision towards investments in Tata Teleservices.