Lower PLF and PAF impacted Q4 result
* PAT at Rs2.2bn (+251% YoY) was below our estimates of Rs3.1bn, primarily due to lower than anticipated realization and higher other expenses during the quarter. Lower generation across Rosa and Butibori also impacted blended realization during Q4FY17.
* Sasan’s PLF in Q4FY17 declined to 91.0% vs 94.2% YoY, while its PAF was also down to 86% vs 101% YoY. Rosa’s PLF increased to 57.3% vs 52.5% YoY, while PLF of Butibori declined to 52.7% vs 74.0% YoY due planned overhaul of 1 unit.
* Consequently, total generation declined 4.1% YoY to 10.2bn unit in Q4FY17. The company has signed a definitive PPA with the Bangladesh Government for phase I - 750 MW of integrated combined cycle power project.
* Stock is trading at 7.2x FY19E P/E and 0.5XFY19E book with a RoE of 7.0% (FY19E). We have maintained our estimate and target price of Rs59/share. Maintain a Buy rating
Fall in generation impacted topline, offset by lower tax expenses
The revenue in Q4FY17 was flat at Rs24.7bn (-0.1% YoY), primarily due to 4.1% YoY fall in generation to 10.2bn unit, offset by 4.0% YoY rise in blended realization to Rs2.4/unit. Generation was impacted due to 28.8% YoY fall in generation across the Butibori plant (due to planned overhaul of one unit) and 3.4% YoY decline in generation across its Sasan UMPP. However, Rosa plant reported a 9.1% YoY rise in generation on low base. Realisation declined on a QoQ basis due to increased proportion of sale from Sasan unit which sells power at lower tariff of Rs1.6/unit. EBITDA increased by 3.9% YoY to Rs11.1bn due to 2.4% YoY decline in fuel expenses and 6.4% YoY decline in other expenses. While depreciation increased 5.6% YoY to Rs1.7bn in Q4FY17, interest expenses declined by 8.3% YoY to Rs7.3bn in Q4FY17 as Q4FY16 included one off expenses. Tax expenses declined 39.7% YoY to Rs695 mn due to high YoY base and consequently, PAT increased 250.8% YoY to Rs2.2 bn. After adjusting for Rs400mn of one off expenses in other expenses, adjusted PAT came in at Rs2.5bn which was still below our expectation of Rs3.1bn due to lower than anticipated realisation and revenue during the quarter.
PLF across Sasan declined to 91.0% vs 94.2% YoY due to soft demand. Rosa’s PLF increased to 57.3% vs 52.5% YoY. PLF was subdued due to low offtake by the state discoms. PLF for Butibori declined significantly to 52.7% vs 74.0% YoY due to planned overhaul of one of its plant.
Target price maintained at Rs59; reiterate a BUY
Reliance power’s all 3 operational projects face virtually no risk related to receivables (Sasan UMPP, due to its tariff structure will always qualify for Merit Order dispatch & Rosa RoE, due to in-built efficiency). Accordingly, we maintain our estimates and SOTP target price of Rs59/share (7.2x FY19E P/E and 0.5XFY19E book, Reiterate a Buy rating.
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