19 May 2020
4QFY20 Results Update | Sector: Utilities
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
146 / 1.9
339 / 238
TP: INR351 (+16%)
Better performance of distribution drives beat
Distribution biz may see near-term impact on lower volumes; Maintain Buy
Torrent Power’s (TPW) 4QFY20 results highlight the improved performance
of its distribution businesses (franchise and licensed) along with some
benefit of merchant sales. Consol. EBITDA improved 17% YoY to INR8.3b.
TPW’s distribution business may get impacted due to lower volumes owing
to the COVID-19 pandemic. However, a healthy balance sheet should help it
to tide over this wave.
Maintain Buy with TP of INR351/share.
Distribution business performance drives beat
TPW’s 4QFY20 EBITDA rose 17% YoY to INR8.3b (v/s est. INR7.4b) amid
lower T&D losses and some merchant volumes. This was partly offset by the
impact of new CERC norms on Sugen.
The beat to our estimates was largely led by (1) improved performance of
its distribution businesses (both franchise and licensed) amid lower T&D
losses, and (2) some merchant volumes. In addition, the company made a
provision of (1) INR0.5b for possible cancellation of its SECI-V project, and
(2) INR0.5b for bad debts – adj. for which the beat would have been higher.
Profitability for Sugen was impacted by the new CERC regulations, which
has tightened O&M norms and increased sharing on efficiency gains.
PBT (before exceptions) was up 39% YoY to ~INR3.1b (v/s est. INR2.3b).
However, the company took an impairment of INR10b pertaining to its
DGEN mega power project. In addition, INR4.4b of one-offs related to tax
were reported. Adj. for these items, PAT would have come in at INR2.8b
(v/s its reported loss of INR2.7b).
Management commentary highlights
Gross Debt of the company stood at INR89b by end-FY20 (against ~INR97b
during FY19). Further with interest resets, the interest cost for the company
is likely to come down.
Demand from end consumers has witnessed a sharp decline in both DF and
DL areas. Collection efficiencies within DF areas, particularly in Bhiwandi,
has been impacted
SECI has not agreed to an extension for TPW’s SECI-V project. Accordingly,
TPW has taken a provision for the same.
Valuation and view – Strong positioning/healthy balance sheet; Maintain Buy
COVID-19 is likely to impact TPW’s distribution business in the near term.
Accordingly, we have cut EPS for FY21/22E by 7%/4% to account for the
same. However, from a medium-term perspective, TPW’s story remains
intact. Outlook for its gas plants has improved with low LNG prices and the
recent off-take of UnoSugen PPA. Further, continued capitalization within
regulated distribution and debt repayment should also aid earnings. We
rating on the company with
TP of INR351/share.
Financials & Valuations (INR b)
2020 2021E 2022E
136.4 136.8 139.8
49.7 -14.4 21.7
190.5 207.9 230.6
Div. Yield (%)
FCF Yield (%)
Shareholding pattern (%)
FII Includes depository receipts
Aniket Mittal – Research Analyst (Aniket.Mittal@MotilalOswal.com); +91 22 6129 1572
13 February 2020
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
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