Outperform on Adani Power, target Rs 63: IDFC

Published: January 30, 2015 1:03:12 AM

We maintain an ‘outperform’ rating on Adani Power (APL) with a revised target price of Rs 63 per share.

We maintain an ‘outperform’ rating on Adani Power (APL) with a revised target price of Rs 63 per share. The order for tariff revision for Tiroda Phase 1 PPA, interim compensatory tariff for Kawai PPA and tariff hikes for Mundra power project would address concerns over APL’s ability to service debt. Moreover, the company has a strong case for a further tariff hike of Rs 0.15-0.20/ Kwh in Haryana and Tiroda PPAs due to changes in domestic laws.

We factor in higher fuel and interest cost and have accordingly reduced our earnings for FY16/ 17E by 33%/ 21% to Rs 560 crore/810 crore.
Gross generation at APL thermal power stations grew 31% y-o-y  and 16% q-o-q to 15.9 billion units. Mundra TPS (4.6GW) reported a PLF of 86%, Tiroda TPS (3.3GW) posted 70% and Kawai TPS (1.3GW) 76%. The company recognised compensatory tariff of Rs 570 crore – Rs 260 crore for Gujarat PPA (1,000 MW) and Haryana PPA (1,424 MW).

Rs 100 crore for supply to Maharashtra discoms against de-allocation of Lohara coal block and Rs 150 crore for shortage of domestic coal, and Rs 50 crore for power supply to Rajasthan. Almost all the compensatory tariff cases are being heard by APTEL/ Supreme Court. APL reported ebitda of Rs 1,750 crore, higher than our estimate of Rs 1,600 crore. Adjusted loss in the quarter came in at Rs 280 crore (estimate, Rs 230 crore) on account of higher interest cost.

By IDFC Institutional Securities

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