Nomura Equity Research expects 4QFY13 results of JSW Energy to surprise whereas Adani Power and Lanco Infratech are expected to disappoint
Nomura Equities Research, in its Quick Note on power utilities and coal expects 4QFY13 normalized earnings of stocks under its coverage to exhibit a mixed bag. Relative to consensus, as was the scenario for 3QFY13, it expects 4QFY13 results of JSW Energy to surprise whereas Adani Power and Lanco Infratech are expected to disappoint.
It does not expect any major surprise in the earnings of NTPC, Power Grid Corporation and Reliance Power; as Nomura’s normalized PAT forecasts for these utilities are 2%-3% below consensus. As regards Coal India, Nomura’s net profit forecast is in line with consensus, although our EBITDA forecast is 4% below consensus; year-end incentives, incremental impact of the diesel price hike and e-auction contribution are key swing factors.
Adani Power (Reduce) – Expect net loss to reduce q-o-q: Nomura has pegged Adani Power’s revenue at Rs18.5 billion (RS2.7/kWh blended realization, Rs4.25/kWh merchant realization, ~6.2bn kWh sales), EBITDA (normalized for fuel creditors-linked MTM exchange fluctuation gains) at Rs4.1 billion and normalized net loss at Rs4.9 billion (assuming 15% effective tax provision). Including potential MTM exchange fluctuation gain on derivative instruments, it expects reported loss at Rs4.6 billion. Once again, fuel mix at Mundra would be the key to profitability; the brokerage’s net loss forecast is 15% above consensus.
JSW Energy (Neutral) – Expect earnings to beat consensus: Nomura has pegged 4QFY13 revenue of JSW Energy at around Rs22.8 billion assuming blended realization at around Rs4/kWh and sales volume of around Rs4.85 billion kWh. The brokerage has build in a 5% q-o-q drop in cost of coal (per kWh) resulting in EBITDA at Rs8.3 billion (36.4% margin) and normalized net profit at Rs3.3 billion. Including potential MTM exchange fluctuation gain, Nomura expects reported PAT at Rs3.56 billion (up around 15% q-o-q).
NTPC (Buy) – Expect a robust performance: Nomura’s normalized earnings forecast for NTPC is marginally below consensus on the back of improved Plant Availability (PAF) and utilization (PLF) for coal-fired stations. It expects normalized earnings at Rs25.6 billion (up 11% y-o-y, 4% q-o-q). Including the recovery of prior period dues and interest thereon, Nomura expects reported PAT at Rs46.5 billion.
Lanco Infratech (Buy) – Expect cash losses to widen: Nomura expects: (1) Consolidated revenues to be marginally lower q-o-q as power revenues decline on lower PLF, solar EPC revenues pick up, non-solar EPC revenues remain stagnant and revision of the selling price to Bluewaters enhances Griffin Coal’s top line; and (2) EBITDA to drop 10% q-o-q, primarily due to lower contribution from the power business. Together with a marginal uptick in interest outgo and lower tax outgo, its expects Lanco Infratech’s normalized net loss at Rs4.7 billion (up 7% q-o-q); including potential MTM f/x gains. Nomura has pegged reported net loss at Rs4.5 billion. The 4QFY13 EBITDA forecast is 9% below consensus while normalized net loss forecast is 22% above consensus, said Nomura.
Reliance Power (Reduce) – Expect ~35% RoE for Rosa: Factoring in around 35% RoE for Rosa (1200MW), Nomura expects consolidated EBITDA of Reliance Power at around Rs 3.7 billion (up 108.6% y-o-y, down 22.4% q-o-q). Together with a forecast 11% q-o-q drop in non-operating income (lower cash in hand) and a 20% potential tax incidence, the brokerage expects normalized net profit at Rs2.3 billion (up 32% y-o-y, down 32% q-o-q) and reported PAT at Rs2.4 billion. Normalized PAT would appear sharply lower q-o-q as 3QFY13 RoE at Rosa was likely exaggerated by recouping of fixed cost under- recovery in 2QFY13 on the back of outages-led low plant availability.
Power Grid Corporation (Buy) – All eyes on FY2013 commissioning: Nomura expects a 4.7%/3.4% q-o-q growth in revenues for PGCIL and EBITDA, driven by around Rs26 billion effective incremental capitalisation of transmission assets for the quarter. Building in a 20% drop in non-operating income (on the back of a lower cash chest), the brokerage expects normalized net profit to be up around 3% q-o-q (up 19% y-o-y) at Rs10.8 billion. Nomura’s 4QFY13F earnings forecast is 3% below consensus.
Coal India (Buy) – Expect PAT at Rs49.6 billion (up 25% y-o-y): On the back of a 130 million tonne (mt) offtake, Nomura has build-in: (1) 10% sales via e-auction; (2) blended realization at Rs1,472/tonne (up 2.3% q-o-q), including year-end incentives of Rs750 million; and (3) EBITDA at Rs53.5 billion (implying 28% EBITDA margin) post OB removal adjustment of around Rs18 billion. This translates to a normalized PAT of Rs49.6 billion (up 25% y-o-y). Nomura’s net profit forecast for is in line with consensus.
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