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You are here : IndiaNotes >> Research & Analysis >> Companies >> Tata Power Company Ltd. >> Research

Tata Power: Improving Operational Performance; Maintain BUY

Reliance Securities | 24 Aug, 2017  | Follow Author | Add to my Favourites 
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Tata Power Company (TPCL) has posted an improved performance in 1QFY18 with its consolidated net profit rising by 126% YoY to Rs1.64bn (vs. Rs0.72bn in 1QFY17) due to strong performance by the coal subsidiaries, renewable business and better operational performance. Notably, renewable business generated Rs1.09bn PAT in 1QFY18 compared to Rs0.26bn in 1QFY17. Consolidated revenue rose by 2% YoY to Rs67.2bn mainly due to improved revenue from Welspun Renewable Energy (WREPL). Though tariff issue at Mundra UMPP and operational issues in Mumbai Licence area have been impacting TPCL’s stock performance over last 3-4 years, we believe that these issues have already been factored in the share price. Hence, we reiterate our BUY recommendation on the stock with a revised Target Price of Rs88.


WREPL Aids Consolidated Revenue


TPCL’s consolidated revenue rose by 2% YoY to Rs67.2bn mainly due to improved revenue from WREPL. Improved contribution from the coal subsidiaries can be attributed to 42% YoY rise in net realisation to US$55.5/tonne in 1QFY18, even though coal sales declined by 4% YoY at 14.5mnT. Net sales of Coal & infrastructure business grew by 28% YoY to Rs20.4bn in 1QFY18, while PAT zoomed by 190% YoY to Rs3.2bn. CGPL revenue decreased by 3% YoY to Rs11.7bn, while loss increased to Rs4.3bn in 1QFY18 from Rs3.8bn in 1QFY17 due to negative impact of higher coal prices was partially offset by MTM gains. TPCL’s consolidated EBITDA surged by 19% YoY to Rs15.8 bn aided by contribution from existing and acquired renewable assets as well as improved contribution from the solar manufacturing subsidiary.


Mumbai operations Aid Standalone Revenue; Consolidated PAT Zooms


TPCL’s standalone revenue grew by 9% YoY to Rs19.1bn in 1QFY18 compared to Rs17.5bn in 1QFY17 mainly due to Mumbai operations. The Company’s consolidated PAT surged by 126% YoY to Rs1.64bn in 1QFY18 compared to Rs0.72bn in 1QFY17 led by strong growth in renewable businesses. However, the consolidated PAT was impacted by higher tax provision of ~Rs1.2bn in 1QFY18 compared to 1QFY17. Notably, renewable business generated Rs1.09bn PAT in 1QFY18 compared to Rs0.26bn in 1QFY17.


Outlook & Valuation


We expect that the lower earnings from Mundra UMPP will continue to weigh on the overall earnings of TPCL. However, TPCL is taking measures to reduce generation cost through alternate fuel sources and monetisation of non-core investments. We reiterate our BUY recommendation on the stock with a revised Target Price of Rs88.


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About Reliance Securities

Reliance Securities, the broking arm of Reliance Capital, is one of the India’s leading retail broking houses, providing customers with access to equities, derivatives, currency, IPOs, mutual funds, bonds, and corporate FDs amongst others. The large array of financial offerings helps customers fulfilling their investment objectives on one platform. Focus on timely & error-free execution represents its core strength. Their best in class research offerings, high degree of compliance with stock exchange regulations, ethical business standards, & strong risk management capabilities; Reliance Securities positions itself amongst strong & innovative brands in the financial services space.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.

 




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