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)
87.5 / 1.1
74 / 27
In-line; Better Mundra-Coal JV offsets lower renewable
Debt reduction takes place but levels still elevated; Maintain Neutral
Tata Power’s (TPWR) 4QFY20 results reflect the benefit of better working of
the Mundra-Coal JV hedge offset by lower renewable (EPC + generation)
and S/A performance. Adj. PAT stood at INR2.1b (v/s INR2.3b in the
Going forward, divestment related measures could aid cash inflow and
subsequent debt repayment. However, with continued renewable capex, and
given the current environment, we await further steps on this front. Maintain
Neutral. Successful renegotiation of Mundra PPA provides an upside risk.
Profits aided by benefits of the Mundra- Coal JV hedge
Consol. adj. PAT for TPWR came in at INR2.1b (v/s est. INR2.2b) on better
working of the Mundra-Coal JV hedge, which was partly offset by lower
performance within RE (generation + EPC) and S/A. TPWR’s current quarter
numbers too benefitted with the addition of Tata Projects as an associate
Mundra (EBITDA) and coal JVs (PAT)
increased to INR3.8b (v/s INR2.4b in
4QFY19). The previous year was impacted due to the timing effect of coal
prices, in our view.
PAT was down to INR0.5b (v/s INR0.8b in 4QFY19).
PAT stood at ~INR0.5b (v/s INR0.9b in 4QFY19).
Management commentary highlights: Progress on asset monetization
TPWR management has noted completing the sale of its Cennergi business
and receiving USD110m. Sale of its defense business is expected in 2QFY21
and the company is also discussing the potential sale of its Renewables and
Shipping portfolio. TPWR’s stake in Tata Projects though has been put on
hold due to low valuations being offered in the current environment.
The company has indicated a few delays in collections from its residential
customers due to extensions given by the regulator. TPWR though expects
cash flows for these to begin by end-May’20 or beginning of Jun’20.
Asset monetization can aid debt reduction; Maintain Neutral
Net debt has reduced to INR471b (from INR491b in FY19), but still remains
elevated. The company’s divestment related measures could aid cash inflow
and subsequent debt repayment. However, with continued capex in
renewables and given the current environment, we await further steps on
this front. Besides, upcoming new regulations for Indonesian coal mines
(concerning tax and royalty) could be an overhang.
The amendment of Mundra PPA, on the other hand, still awaits state
approval, and thus, we have not built in any benefit from this. Successful
renegotiation of this PPA – based on HPC recommendations – would
provide an upside. With the stock down ~40% over the past three months,
TPWR does look attractive. However, we await (a) further steps on the
monetization front, and (b) the company to emerge out of the current
situation without stretching debt. We have cut our SOTP to reflect higher
debt estimate and lower valuations for its certain EPC businesses. Maintain
Neutral with SOTP-based target price of INR38/share.
Financials & Valuations (INR b)
2020 2021E 2022E
EBITDA Margin (%)
Cons. Adj. EPS (INR)
EPS Gr. (%)
Div. Yield (%)
FCF Yield (%)
291.4 291.2 305.8
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.
Investors are advised to refer through important disclosures made at the last page of the Research Report.