Adani Power- Limping along, awaiting compensatory order - Kotak

Adani Power reported highest-ever quarterly losses of Rs5.3 bn on account of capitalization of costs from newly commissioned units (without incremental contribution). Improved realizations and lower fuel costs offered some respite, but clarity on compensatory tariff for Mundra remains the beacon of hope for APL.

Maintain SELL with a TP of Rs35/shareWe maintain our SELL rating with a target price of Rs35/share. We have revised our FY2014/15E EPS estimates to (Rs1.9)/Rs4.5 from (Rs0.9)/Rs5.1 earlier to factor in (1) lower PLF resulting in lower generation and (2) higher capitalization rate (of depreciation and interest costs) for newly commissioned units at Mundra. However, we highlight that re-negotiation of sale arrangements, especially at Mundra, and/or higher availability of low-cost coal than factored by us remain a risk to our investment thesis.

Source : Equity Bulls

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