KSK Energy - Q3FY12 Result Update - Emkay

Reco: HOLD
CMP: Rs 72
Target Price: Rs 75

Improvement in coal supplies; maintain hold

- 3Q12 PAT of Rs755mn above exp. driven by i) fuel cost (-7% qoq) and ii) other income (+57% qoq). Linkage coal supply better for Wardha/Arasmeta I. Issues continued with Arasmeta II (no fuel) and Sitapuram.

- Co. confident of getting 70-75% linkage coal for Wardha in 4Q vs 60% in 3Q, resulting in fuel cost of Rs2.4-2.5/unit vs 3Q at Rs2.9/unit. Have factored Rs2.9/unit fuel cost in FY13 for Wardha, would wait for 4Q to change our assumption.

- Open access received for Wardha, co. in process of signing BPTA. Captive power supplies to start from Mar12. PPAs at 10-20% discount to ind. grid power rates in Maharashtra.

- Were expecting run up post 2Q, on attractive valuations & better 3Q. But, CMP prices in (1) ~50-60% linkage coal for Wardha & (2) Mahanadi I. Maintain Hold; Upside triggers - (1) 60% + linkage coal for Wardha & (2) alternative block.

Source : Equity Bulls

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