Adani Transmission reported revenue of Rs 5.3 billion in Q3FY16, a decline of 7% q-o-q and Ebitda of Rs 4.7 billion, a decline of 10% q-o-q. EBITDA was in line with our estimates. Other income for the quarter was Rs 28 million, against our estimate of Rs 200 million. Consequently, PAT for the quarter was Rs 799 million against our estimate of Rs 942 million.
The profit for the Q2FY16 includes prior period income of Rs 770 (adjusting for taxes). Adjusting for prior period income, profit was flat q-o-q. We note that company has been booking revenues at provisional tariff for two transmission assets. Tariff order is expected in Q4FY16.
Adani Transmission acquired all the transmission assets in Q4FY15/Q1FY16 and was listed on exchanges post demerger of Adani Enterprises.
We have revised our earnings estimates for FY16 downwards by 8% to factor in low other income for Q3 FY16; Maintain our estimates for FY17E/FY18E.
We expect FY16-18E revenue and earnings CAGR to be 10% and 21% respectively, led by final tariff orders for existing assets and refinancing-led interest cost savings. Given the attractive valuations (6.8x FY18E earnings and 0.9x FY18E book value) and strong 21% EPS CAGR over FY16-18E, We maintain outperformer rating with 12-month PT of Rs 54/share.
The key risk is cost escalation in new projects. ATL is operating four transmission projects totaling 5051 ckm under operation.