13 August 2020
1QFY21 Results Update | Sector: Utilities
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Debt reduces as monetization benefit flows through
Risk-reward favorable; Upgrade to Buy
TP: INR66 (+25%)
Upgrade to Buy
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
143.2 / 1.9
69 / 27
Financials & Valuations (INR b)
2020 2021E 2022E
291.4 310.2 339.8
79.4 76.5 78.1
10.2 10.6 14.7
EBITDA Margin (%)
27.3 24.7 23.0
Cons. Adj. EPS (INR)
EPS Gr. (%)
78.2 -11.6 38.6
66.8 67.8 70.6
41.2 39.1 28.2
14.1 16.0 11.5
Div. Yield (%)
FCF Yield (%)
35.9 28.0 30.5
Shareholding pattern (%)
FII Includes depository receipts
Tata Power (TPWR)’s results reflect the benefit of asset monetization plans
and better WC management as net debt (excl. restricted cash at CESU)
declined to INR444b (from INR471b in FY20).
Divestment-related measures (part receipt of International Shipping
business, Arutmin, and Tata SED) and the infusion of INR26b from
promoters would continue to aid debt reduction. As we build-in
expectations of normalization in its EPC businesses and some WC by FY22,
we view the risk-reward as favorable at current levels. The approval of a
tariff hike at Mundra, possible benefits from the merger of CGPL & Tata
Power Solar with TPWR, and favorable InvIT valuations provide upsides.
Upgrade to Buy, with TP of INR66/sh.
Profits reflect impact on EPC businesses
Adj. PAT stood at INR2.3b (v/s INR2.8b in the previous year), in line with our
est. of INR2.3b. The number largely reflects the impact on its EPC
businesses (Solar EPC and Tata Projects) and lower PAT at S/A, offset by
better working of the Mundra–Coal JV hedge.
Tata Power Solar and Tata Projects reported combined loss of INR0.6b (v/s
profit of INR0.3b in the previous year).
Mundra (EBITDA) and Coal JV (PAT)
rose to INR4.8b (v/s INR4.1b in
1QFY20) due to lower generation at Mundra and lower cost of production
at Coal JV.
PAT was broadly flat YoY at INR1.2b.
Net debt (excl. restricted cash at CESU) declined to INR444b (from INR471b
in FY20), led by the monetization of Cennergi and the International Shipping
business, along with better WC management.
Management commentary: Progress on asset monetization
TPWR’s management noted it had received USD138m of the sale
consideration of USD213m by the end of June, and the balance was
received in July. Additionally, 1) the sale of its Defence business is expected
over the next few months and 2) it expects the InvIT for its Renewable
portfolio to be completed by the end of FY21.
Regarding the Mundra PPA, the co. is in talks with the Gujarat government
post a change in the approval process from the HPC framework to GERC.
TPWR noted it would approach CERC for an amendment upon approval
from Gujarat and Maharashtra.
Aniket Mittal – Research Analyst (Aniket.Mittal@MotilalOswal.com)
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