22 May 2021
4QFY21 Results Update | Sector: Utilities
Torrent Power
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
TPW IN
481
216.5 / 3
465 / 293
13/32/-14
539
Distribution business normalizes
CMP: INR451
TP: INR480 (+7%)
Downgrade to Neutral
Financials & Valuations (INR b)
Y/E MARCH
2021 2022E 2023E
Sales
118.3 140.5 144.8
EBITDA
32.3 37.6 40.9
Adj. PAT
11.0 15.0 16.8
EBITDA Margin (%)
27.3 26.8 28.3
Cons. Adj. EPS (INR)
22.9 31.1 35.0
EPS Gr. (%)
-18.2 35.8 12.4
BV/Sh. (INR)
211.9 234.0 260.0
Ratios
Net D:E
0.7
0.7
0.5
RoE (%)
11.4 14.0 14.2
RoCE (%)
8.6 10.2 10.6
Payout (%)
48.0 28.9 25.7
Valuations
P/E (x)
19.7 14.5 12.9
P/BV (x)
2.1
1.9
1.7
EV/EBITDA(x)
8.9
7.7
6.9
Div. Yield (%)
2.4
2.0
2.0
FCF Yield (%)
7.8
2.7
8.4
Shareholding pattern (%)
As On
Mar-21 Dec-20
Promoter
53.6
53.6
DII
20.2
19.5
FII
8.5
9.1
Others
17.8
17.9
FII Includes depository receipts
Price captures demand recovery; downgrade to Neutral
Torrent Power (TPW)’s result highlights the benefit of normalizing demand
in its Distribution Franchise (DF) business, offset by lower renewable
generation. Reported EBITDA was up 11% YoY.
While a fresh set of lockdowns could affect the performance of DFs, power
demand and collections in DFs have not been significantly impacted thus
far. We expect the co.’s DF business to improve over FY22–23. However,
with the recent run-up in the stock (+45% in the last six months), this
improvement is well baked in. Accordingly, we downgrade to Neutral, with
TP of INR480/sh.
Distribution biz normalizes; lower interest costs kick in
TPW’s 4QFY21 reported EBITDA was up 11% YoY to INR9.1b. However, one-
offs such as 1) an INR130m benefit from the reversal of provisions for
doubtful debts and 2) INR380m in fuel cost recoveries in UnoSugen were
observed. Adjusted for these, EBITDA would be at INR 8.6b (est. INR9.0b).
The quarter also saw INR0.5b income related to RLNG trading, offset by
lower renewable generation.
Renewable generation declined 11% YoY at 372Mus, weighed by lower
wind plant load factors (PLFs) – wind PLFs stood at 20.8% for the quarter v/s
22.7% in 4QFY20.
Power purchase at Bhiwandi/Agra was up 7%/8% YoY and has now largely
normalized. FY21 T&D loss at Bhiwandi came in lower at 16.2% (19.1% in
9MFY21). T&D loss at Agra was 13.5% v/s 13.2% in 9M.
Interest costs were down 14% QoQ / 26% YoY to INR1.6b (est. INR1.9b) on
the back of lower debt and borrowing costs (150 bps lower YoY). Adj. PAT
was up 27% YoY to INR3.6b (est. INR3.2b). Reported PAT stood at INR4.0b
v/s loss of INR2.8b in the previous year. The previous year saw an
impairment of INR10b for DGEN. FY21 adjusted profits were down 18% YoY
to INR11b.
Management commentary highlights
Demand from end consumers has recovered, with demand in Distribution
License (DL) and DF up just 14% and 7% YoY, respectively, in 4Q. The co.
noted some reduction in demand at Bhiwandi in April and May due to the
lockdown in Maharashtra – however, this is insignificant.
Collections in its DFs circles remain good at >100%. The co expects to
recover most of the balance of INR1b provisions made in the coming
quarters.
Capex within the DL and DF circles would continue at INR12b p.a. and
INR2.5b p.a., respectively. Capex for under-construction renewable projects
stands at INR16b. 50–60% of renewables-related capex is expected in FY22.
Mar-20
53.6
19.6
8.8
18.1
;
Aniket Mittal – Research Analyst
(Aniket.Mittal@MotilalOswal.com)
13 February 2020
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.