TATA POWER
Reco price/date: Rs 90/May 28;
Current/target price: Rs 92/Rs 95
Tata Power Co Ltd is often considered the only Indian power producer long on coal in net terms as it owns a 30 per cent stake in two mines of Indonesian miner Bumi Resources. A closer look suggests that it brings in a lot of dilution, owing to: i) multi-stage taxation, ii) increasing mining costs with rising coal prices due to high fuel component (40 per cent) and higher stripping ratio, and iii) no tax shield at Mundra where the company is short on coal. Analysts believe Tata Power would be close to 19 million tonnes long on coal in FY15. However, the actual benefit of a $10 increase in coal prices at the pre-Mundra level is only $2.5 per tonne (assuming cash cost of mining goes up $2.5 per tonne with $10 increase in coal prices). Further, after factoring in the impact of cost increase at Mundra, the net benefit is a mere $0.5 per tonne. Maintain add.
ICICI Securities
RELIANCE INFRASTRUCTURE
Reco price/date: Rs 463/ May 27;
Current/Target price: Rs 473/NA
Reliance Infrastructure Ltd reported a stand-alone revenue of Rs 573 crore in the fourth quarter of 2011-12, up 142 per cent year-on-year. The company’s earnings before interest, taxes, depreciation and amortisation (Ebitda) for the quarter stood at Rs 620 crore (up 136 per cent y-o-y), while it reported a net profit of Rs 660 crore (up 84 per cent y-o-y). The strong revenue growth, fueled primarily by EPC (engineering procurement and construction) revenue, was muted by the 150 basis points sequential fall in EPC Ebit margins. While negative tax in Q4 (deferred tax assets created and previous year taxes included) pushed up net profit, full-year PBT of Rs 2,330 crore was three per cent below analysts estimate. Consolidated revenue for the quarter was Rs 7,140 crore (up 81 per cent y-o-y), Ebitda was Rs 500 crore (up 48 per cent y-o-y), and net profit was Rs 410 crore. Maintain Equal-weight.
Morgan Stanley Research