Tata Power - 1QFY14 Results Update - Motilal Oswal

Dividend income boosts standalone PAT: Adjusted standalone PAT was INR3.5b, higher than estimate of INR2.3b, boosted by (1) higher than expected EBITDA owing to arrears, and (2) higher other income. Adjustments include (1) provision for interest on disputed arrears (INR450m), (2) prior period revenues (INR1.2b), and (3) forex loss of INR657m.

Consolidated PAT below estimate: At the consolidated level, TPWR reported loss of INR1.2b, mainly led by foreign exchange loss of INR3b. Adjusted for the foreign exchange loss and INR700m on account of standalone results, consolidated PAT was INR1.1b, lower than our estimate of INR2.3b. PAT was lower than expected due to higher losses from Mundra UMPP, lower contribution from Maithon and sizably lower contribution from mining SPVs.

Mining SPV realizations decline substantially: EBIT of mining SPVs declined to INR962m from INR1.7b in 4QFY13, led by USD6/ton (~10% QoQ) decline in realizations. Production cost too declined by INR5.3/ton QoQ, but higher administration/marketing cost led to lower EBIT.

Other projects contribution: Maithon reported its first ever meaningful PAT at INR339m, though marginally below our estimate. On Mundra UMPP, total underrecovery works out to INR0.66/unit (calculated on net generation). Of this INR0.50/unit is on account of fuel cost according to the management.

Cutting earnings estimates: We cut our earnings estimates for FY14/15 by ~10%, largely to factor in lower contribution from mining SPVs and higher losses from Mundra UMPP. We now estimate consolidated PAT at INR8.4b for FY14 (down 9%) and INR9.9b for FY15 (up 18%). The stock trades at 16.3x FY15E EPS and 1.3x FY15E BV (RoE of 8%). We cut our target price by ~10% to INR77. Maintain Neutral.

Source : Equity Bulls

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