Reliance Infrastructure (RInfra) - Impacted by tariff stay

Q3FY10 results review - ICICI Securites

RInfra's Q3FY10 profits rose 11% YoY to ~Rs2.8bn, largely due to ~53% YoY rise in other income. The profits could have been higher by Rs580mn had the company accounted for increased tariff, which was later placed on stay by the Maharashtra Electricity Regulatory Commission (MERC). The EPC division reported a dismal Q3, with revenues dropping 31.6% QoQ to Rs6.35bn. But given the lumpy nature of EPC, maintained guidance of Rs35bn revenues annually (only Rs22bn revenues in 9MFY10) and strong orderbook of Rs190bn, we remain positive on EPC outlook. RInfra is tying up for mid-term power requirement for Mumbai distribution region and the management claims to complete this exercise by end-February '10. Already, RInfra has tied up for 300MW in '10-11 at significantly lower rate (~Rs3/unit), which further strengthens our belief that reducing power purchase cost would lead to recovery of past under-recoveries. We lower RInfra's target price to Rs1,345 from Rs1,378 to reflect the change in Reliance Power's (RPower) fair value to Rs140 from Rs145 and to account for change in EPC valuations. We maintain BUY.

Source : Equity Bulls

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