Adani Enterprises (ADE) reported Q2FY16 PAT of R300 crore, sharply below our estimate of R540 crore, due to lower trading margins. The reported financials are not comparable on y-o-y basis due to de-merger of the ports, power and transmission businesses. EBIDTA came in at R340 crore with EBIDTA margin for the quarter at 3.0% against our estimate of 7.7%. Other income came in at R450 crore, above estimate of R250 crore, led by dividend income of R170 crore and interest income on ~R500 crore loans to Adani Power.
ADE offers a unique combination of coal mining and trading businesses and is also venturing in new ventures like solar power generation and development of solar parks. The domestic coal MDO business offers good growth potential with a large number of captive coal mines having being auctioned/allocated. Stock trades at P/B of 0.6x on FY17E basis. Maintain Outperformer with a revised PT of R100.
Coal trading +84%yoy at 21.2mt (in Q2FY15 coal sold to Adani Power was being eliminated); domestic MDO +71%yoy at 1.2mt; CGD -5.3%yoy at 96MMSCM; Agro +33%yoy at 0.4mt. Coal trading EBIDTA declined 71%yoy to Rs100/tonne (~$1.5/tonne).
Coal trading volumes grew 84%yoy to 21.2mt in Q2FY16.