Tata Power: Radiating light

Improved unit realisations and check on expenses helped in offsetting rise in fuel costs.

Tata Power reported an improved performance in the December 2007 quarter, as improved unit realisations and a tight check on expenses helped in offsetting a 35 per cent y-o-y rise in the fuel costs.

As a result, the company's operating profit grew 28.5 per cent y-o-y to Rs 268.1 crore and net revenues rose 18.3 per cent to Rs 1419.4 crore in the last quarter.

The operating profit margin went up 150 basis points y-o-y to 18.9 per cent in Q3 FY08.

Strong investor enthusiasm towards the power sector has driven up the shares of Tata Power by 66 per cent since the beginning of Q3 FY08 compared with a 8 per cent increase in the Sensex.

Rival Reliance Energy's operating profit margin declined 10 basis points y-o-y to 4.9 per cent in Q3 FY08.

Tata Power sold 3,614 million units of electricity in the December 2007 quarter, a decline of 1.1 per cent y-o-y. Its realisations were estimated at Rs 3.89 per unit in Q3 FY08, a rise of 20.5 per cent y-o-y.

A tight check on expenses helped the company make up for the 35 per cent y-o-y rise in cost of fuel to Rs 964.1 crore.

Reliance Energy's realisations grew by an estimated 20 per cent y-o-y to Rs 5.33 a unit in the December 2007 quarter.

However, Tata Power's profit after tax declined 29.5 per cent y-o-y to Rs 197.3 crore, due to higher reversals of tax provisions in Q3 FY07.

The shares of Tata Power trade at 46 times estimated FY08 and 38 times FY09 earnings, riding on the investor euphoria for power stocks, coupled with its holdings in group companies such as Tata Teleservices and VSNL.

UTV Software: Content boost

UTV Software reported a 183 per cent y-o-y growth in consolidated top line to Rs 123.2 crore in the December 2007 quarter.

The boost in revenues was driven mainly by the film and television content production businesses, which grew by 290 per cent and 56 per cent respectively during the quarter.

The company sold its post-production business to Prime Focus for Rs 12 crore. UTV's interactive business, which includes gaming and animation too, reported a 138 per cent top line growth.

However, this division is yet to reach breakeven point. The operating profit rose to Rs 23 crore in the quarter from Rs 2 crore in December 2006, of which over Rs 22 crore was derived from the film production business.

UTV launched its youth-oriented entertainment channel Bindass and Bindass Movies in September 2007. The last quarter saw the launch of the World Movies Channel. A Hindi film channel and a business channel are in the pipeline.

The film content business is increasingly contributing more to the top line-it's gone up from under 50 per cent in Q3 FY07 to almost 68.5 per cent in December 2007.

'Dhan Dhana Dhan Goal' was profitable despite its average performance at the box office since the company had recovered its cost of production through the sale of rights before its release.

Jodhaa Akbar is lined up for release on February 15, followed by two more releases in late March. Besides, the company also has a number of ongoing animation projects such as NBC, Disney Asia and Nickelodeon. At Rs 888, the stock trades at around 24 times estimated FY09 earnings, on the back of high growth rates.

With contributions from Amriteshwar Mathur and Niren Shah