Tata Power - 4QFY12 Results Update - Motilal Oswal

Consolidated PAT lower than estimate: 4QFY12, TPWR adjusted PAT stood at INR3.5b (impairment losses at Mundra UMPP of INR8.2b and forex loss of INR1.7b) v/s estimate of INR5.6b. Lower performance was owing to higher than expected losses at Mundra UMPP (PBT loss of INR1.9b) given take-or-pay charge commitment for port/shipping and lower contribution from KPC/Artumin mines led by lower production/sales; dip in realisationand higher cost.

- Standalone PAT in-line, "distribution" on perpetual bonds as appropriation: Standalone adjusted PAT stood at INR2.2b, after adjusting for forex loss of INR1.1b, in-line with estimate. TPWR has appropriated (below PAT) INR439m and INR1.1b for 4QFY12 and FY12, respectively, towards "distribution" on INR15b perpetual debt/bonds raised in standalone books. The accounting of the same as appropriation or charge to profit (quasi interest) is key variable to reported earnings in our view.

- Core profit of coal SPVs impacted; Outlook bleak: Coal sales stood at 15.7m tons (vs 17.5m tons QoQ and 13.8m ton YoY), while realizations stood at USD92/ton (vs USD95/ton QoQ and USD 87/ton YoY) in 4QFY12. Gong forward, contribution from KPC/Arutmin mines may remain under pressure owing to softening coal prices globally (RB Index down 6% since Mar-12).

- Valuations and view: We cut our FY13/14E earnings by 11% / 8% to factor in lower coal realisation (RB index down 6% from Mar-12 levels). Factors such as 1) higher production cost, lower than expected volume growth and further pressure on realisation at KPC/Arutmin mines, 2) lower contribution from Maithon project in FY13E, and 3) accounting of "distribution" on perpetual debt could further put pressure on earnings. Neutral.

Source : Equity Bulls

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