Tata Power - Coal Business Disappoints - ENAM Direct

Tata Power's (TPWR's) Q2FY13 adj. PAT of Rs 2 bn was below our estimate of Rs 3.1 bn due to: (a) lower profits from coal business on lower sales volumes (at 15.5 mnt vs. est. of 16.5 mnt) and lower realization (USD 78/t vs. est. of USD 80/t) and (b) losses at Maithon project (loss of Rs 0.4 bn vs. est. of nil profit).

Cut estimates, downgrade to SELL: We cut our FY13E and FY14E EPS to Rs 4.3 (Rs 7.9 earlier) and Rs 5.9 (Rs 6.9 earlier) to account for (a) slower ramp up in coal production volumes (65/75 MTPA in FY13/14 vs. 75/80 earlier), and (b) lower profitability at Maithon project in FY13. Our SoTP-based TP stands revised to Rs 94 (Rs 100 earlier). Downgrade to SELL from HOLD as earnings are likely to be under pressure.

Key upside risk: CERC has accepted TPWR's plea for UMPP tariff revision and first hearing is scheduled on 4 December 2012. Positive outcome is key upside risk to our call, as we have NOT built in tariff revision.

Source : Equity Bulls

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