MENU

Published on 31/01/2020 2:30:27 PM | Source: Motilal Oswal Services Ltd

Option Strategy Tata Power Ltd By Motilal Oswal

Posted in Broking Firm Views - Short Term Report| #Tata Power Company Ltd #Power Sector #Motilal Oswal #Trading Report

Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel  https://t.me/InvestmentGuruIndia 

Download Telegram App before Joining the Channel

Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel https://t.me/InvestmentGuruIndia 

Download Telegram App before Joining the Channel

 

Mundra-Coal JV working favorably

Debt remains elevated; Maintain Neutral

* Tata Power’s (TPWR) 3QFY20 results reflect benefits of the Mundra-Coal JV hedge, resulting in PAT improving to INR1.6b (v/s adj. loss of INR1.1b).

*While divestment-related measures could aid cash inflow and subsequent debt repayment, current valuations bake in these benefits. Maintain Neutral with TP of INR66; successful renegotiation of Mundra PPA provides an upside risk.

 

Profits aided by benefit of Mundra-Coal JV hedge

* Consol. adj. PAT came in at INR1.6b (v/s adj. loss of INR1.1b and below est. INR2.4b) on better working of the Mundra-Coal JV hedge. This was led by higher-than-expected interest costs and slightly lower-than-expected performance at Standalone and Delhi distribution.

* Mundra (EBITDA) and coal JVs (PAT) rose to INR4.8b (v/s INR1.5b in 3QFY19), due to no impact of DMO (INR0.9b impact of previous year) and benefit of the favorable timing effect of lower coal prices.

* Delhi distribution EBITDA came in at INR0.9b (v/s INR1.2b in 3QFY19) as the previous year included an INR0.3b benefit from a tariff order.

* RE (ex-standalone) EBITDA was up 5% YoY to INR4.3b.

* Maithon EBITDA was flat YoY at ~INR2b.

 

Management commentary: Progress on asset monetization

* TPWR’s management has noted the sale approval of its Cennergi business by the Competition Commission, proceeds are expected in 4QFY20.

* Additionally, the defense business sale has received NCLT approval and positive discussions are ongoing for renegotiation for its ITPC PPA. It is also set to receive ~USD5m of proceeds per month from Arutmin’s sale.

* Amendment for Mundra PPA may take place in the next few months. According to the company, in a recent meeting, HPC has asked states to get approvals in place by end-Mar’20.
 

Mundra PPA renegotiation can provide relief

* Net debt remains elevated at INR475b on account of continuing capex and stretched receivables for renewable portfolio. Receivables for renewables stand at INR11b (v/s ~INR6b in FY19). Besides, upcoming new regulations for Indonesian coal mines (concerning tax and royalty) could be an overhang.

* The amendment of Mundra PPA, on the other hand, still awaits state approval; we have not built in any benefit from this. Successful renegotiation of this PPA - based on HPC recommendations - would provide an upside to our estimates. Maintain Neutral with SOTP-based target price of INR66.

 

To Read Complete Report & Disclaimer Click Here

 

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

 

Above views are of the author and not of the website kindly read disclaimer