Curtailed losses at Mundra UMPP formed the mainstay of Tata Power’s consolidated earnings for Q4FY15, as the benefits of declining coal prices set in with a lag, even as offsetting contribution from the coal mines had already moderated a few quarters ago. In our view, (1) resolution of the regulatory imbroglio on compensatory tariffs for Mundra UMPP, (2) conclusion of sale of part coal mines in Indonesia, and (3) subsequent reversal in prices of imported coal (for balance ownership) are key catalysts for the stock. Maintain ‘add’ with revised price target of of Rs 90 per share from R96 earlier.
On a consolidated basis, Tata Power reported revenues of Rs 8,100 crore (-7% y-o-y, -7% q-o-q), Ebitda of Rs 1900 crore (+6% y-o-y, 29% q-o-q) and net income of R250 crore for Q4FY15 against losses of R160 crore in Q4FY14 and losses of R180 crore in Q3FY15. Performance of the consolidated entity was boosted by lower losses at Mundra of R7,600 crore (R240 crore in Q3FY15 and R320 crore in Q4FY14) owing to reduced fuel cost under-recovery and lower depreciation. Contribution from the coal business remained subdued with sales of 20 million tonnes (-11% y-o-y, -4% q-o-q) on realisations of $47/tonne ($56/tonnes in Q4FY14 and $52 in Q3FY15), yielding an Ebit of R210 crore in Q4FY15 (-56% y-o-y, -29% q-o-q).
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