5 February 2014
3QFY14 Results Update | Sector:
Utilities
Jaiprakash Power
BSE SENSEX
20,212
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
6,001
JPVL IN
2,938.0
37.6/0.6
35/09
-28/15/65
CMP: INR13
TP: INR21
Buy
Financials & Valuation (INR Million)
Y/E Mar
Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA
17.4
0.6
14.8
8.1
0.6
7.1
3.3
0.5
4.6
2014E
30.0
21.3
2.2
0.7
(41.8)
22.3
3.4
5.2
-
2015E
71.9
44.6
4.7
1.6
116.1
20.8
7.5
9.3
-
2016E
107.8
61.2
11.7
4.0
146.9
24.5
17.6
13.4
-
PAT below estimate:
JPVL’s standalone PAT loss was INR1.5b, higher than our
estimate of INR875m. Lower generation at Bina Power, lower merchant
realization for Karcham Wangtoo hydro project and transmission costs impacted
profitability.
Operational performance strong:
Hydro generation for Baspa/Karcham Wangtoo
grew by a robust 19%/21% YoY in 3QFY14, while Bina Power PLF was 46% v/s
average of 33% in 1HFY14. Plant availability at Bina was robust, enabling recovery
of fixed charge, while generation was impacted due to backdown by MPDISCOMs.
Project execution on track:
(a) Vishnuprayag project debris has been cleared and
the project expected to resume operations by March 2014, (b) Nigrie project 1st
unit synchronization by March 2014, (c) Excavation/ initial production has begun
at Amelia mine (linked to Nigrie project) and evacuation infrastructure (merry-go-
round) is in place, (d) Clearances are in place for Dongri Tal mine and land
acquisition is underway, CoD by 1QFY15, (e) Capex of INR76b incurred on Bara
project.
Interest cost mounting; de-leveraging key:
JPVL’s interest cost has gone up by
~3.5x over FY11 to FY14E (3QFY14 was the 7th straight quarter of QoQ increase),
given higher corporate debt on books in a rising interest rate scenario. JPVL is in
discussions to sell hydro power assets, as per media articles. Divestment would
help de-leverage/meet equity funding requirement.
Cutting estimates/target price; maintain Buy:
We cut our FY14E/15E earnings by
~40%/20% to model for higher interest cost, lower merchant realization, lower
contribution from Bina project and transmission costs. We expect JPVL to report
net profit of INR2.2b in FY14 (down 42%) and INR4.7b in FY15 (up 116%). We cut
our target price from INR29 to INR21. The stock trades at 8x FY15E EPS and 0.6x
FY15E BV.
Nalin Bhatt
(NalinBhatt@MotilalOswal.com); +91 22 3982 5429
Investors are advised to refer through disclosures made at the end of the Research Report.

Jaiprakash Power
3QFY14 below estimate due to lower merchant realization, transmission
cost
JPVL reported standalone revenue of INR4.9b (up 15% YoY), lower than our
estimate of INR6.1b. Lower than estimated revenue was owing to lower
generation at Bina power project (509MU, vs est of 821MUs), while generation
at Karcham and Baspa was largely in-line. Also, the revenue growth was
impacted due to lower merchant realisation at INR3.02-3.04-/unit, vs
INR3.54/unit YoY and our estimate of INR3.50/unit.
Fuel cost for the quarter was lower at INR1.1b (vs est of INR1.5b), and stood at
INR2.18/unit, vs INR2.90-3.00/unit in 1Q/2Q, indicating efficiency gains,
stabilization at Bina (46% PLF in 3Q, vs average of 33%). Management indicated
that PLF for Bina project remained low, due to backdown by DISCOMs while
availability was robust enabling full recovery of fixed charge.
Other expenditure was higher at INR628m, vs est of INR425m. Transmission
charges for the quarter stood at ~INR448m, vs our est of INR360m. Thus, EBIDTA
for the quarter stood at INR2.8b, vs est of INR3.8b.
Interest continues to remain high and was up for 7th straight quarter at INR3.6b,
owing to higher corporate debt in rising interest rate scenario. Depreciation
however remained flat at INR1b since last 3 quarters.
Other income for the quarter includes INR150m of dividend from Jaypee
Powegrid. PBT loss for quarter thus stood at INR1.7b, vs our est of loss of INR1b.
Losses at net level thus stood at INR1.5b, higher than our est of INR875m.
Hydro power project generation growth robust, Bina PLFs low due to backdown
3QFY14
3QFY13
Change
Project
PLF
PLF
Gen (MUs)
(%)
Gen (MUs)
(%)
% YoY
bps
Baspa
179
27
151
23
19.1%
439
V Prayag
0
0
261
30
N.A.
N.A.
K Wangtoo
569
26
467
21
21.9%
467
Bina
509
46
171
31
196.9%
1516
Source: Company, MOSL
Update on key projects
Karcham Wangtoo under LT PPA:
JPVL has submitted a petition to CERC to
adjudicate project cost and expect to sell 704MW of capacity through LT PPA on
regulated return, while balance would be kept on merchant. This would help
reduce volatility in earnings, losses in lean season.
Vishnuprayag project to resume operations by Mar-14:
All debris owing to
flood is now cleared and damn structure is intact. Hydraulic system needs
repair/replacement, which will take 1-1 ½ month. Operations to resume back in
March 2014.
Nigrie project, associated mine commissioning on-track:
For Nigrie project,
Unit-1 is likely to get synchronized by March and Unit-2 by June/July. Initial
excavation has already commenced at Amelia mine, and infrastructure for coal
evacuation is established. For Dongri Tal, all clearances are in place and land
acquisition is underway. Production could start by 1QFY15, while evacuation
infrastructure will be in place by 3QFY15.
5 February 2014
2

Jaiprakash Power
Bara power project:
The capex incurred is INR76b and equity invested would be
~INR20b. Thus, INR10b of incremental equity is required.
Divestment of hydro asset could help de-leverage; interest cost mounting
JPVL’s interest cost has gone up ~3.5x from INR4.5b in FY11 to INR14.8b in
FY14E. This is on the back of sizable increase in ST debt to meet equity in new
projects/increase in capex of projects through ST debt. As at Dec-13, the
corporate debt on the books stands at ~INR35b.
JPVL has announced plans to de-leverage through sale of its existing hydro
power project and media article indicates that JPVL is planning to sell Baspa and
Karcham Wangtoo projects. Media article indicates that it is in talks with TAQA
(Abu Dabhi based) to sell assets at a valuation of INR120-130b.
Total debt on the books for these hydro power projects, including securitization
debt stands at INR65b and thus, balance accrual would enable de-leveraging,
meeting equity funding requirement.
Interest cost for JPVL (INR m)
Source: Company, MOSL
Cut FY14E/15E earnings; Buy
We cut our FY14E/15E earnings by ~40%/20% to factor in lower merchant
realization for K Wangtoo, higher interest cost, delay in approval/realization of
full tariff for Bina and lower generation, and higher transmission cost. We cut
our TP to INR21/sh from INR29/sh earlier owing to above factors.
We now expect JPVL to report net profit of INR2.2b in FY14E (down 42% YoY)
and INR4.7b in FY15E (up 116% YoY). We believe that divestment of hydro
project could be key near term trigger, while timely completion and higher
contribution from Nigrie project remains key monitorable. At CMP, the stock
trades at PER of 8x and P/BV of 0.6x on FY15E basis.
5 February 2014
3

Jaiprakash Power
Jaiprakash Power: an
-
investment profile
Company background
Key investment risks
JPVL, is part of Jaypee Group promoted by Mr.
Manoj Gaur. Promoter group holds 65% in JPVL,
60.7% through the holding company JP Associates
and 4.28% through JP Infra ventures a Pvt. Ltd. co.
Current operating capacity of JPVL stands at
2,200MW
60% of PPA capacity and 41% of total capacity is
signed with UPDISCOMs..
Lower demand has impacted generation at Bina.
Recent developments
Bina I unit -2 of 250 MW was commissioned in
1QFY14.
Key investment arguments
2x increase in capacity over FY14-15E:
JPVL is
currently executing 3.3GW of thermal projects. CoD
for Nigrie and Bara unit-1 is targeted in March 2014.
Thus, JPVL’s installed capacity would grow to 5.5GW
by FY15E.
Well placed on PPA/FSA front:
JPVL’s project
portfolio has balanced mix of capacity on LT and ST
basis and are well backed by fuel supply sources.
Thus, JPVL scores well on PPA/FSA matrix in current
uncertain macro environment.
Robust consolidated PAT growth:
Backed by
capacity addition growth, we expect JPVL’s
consolidated PAT to grow at a CAGR of 46% over
FY13-16E.
Valuation and view
We now expect JPVL to report net profit of INR2.2b
in FY14E (down 42% YoY) and INR4.7b in FY15E (up
116% YoY). We believe that divestment of hydro
project could be key near term trigger, while timely
completion and higher contribution from Nigrie
project remains key monitorable. At CMP, the stock
trades at PER of 8x and P/BV of 0.6x on FY15E basis.
Sector view
Power sector has begun to witness several
initiatives by authorities to address concerns on
SEBs, fuel supply pacts and PPAs. It would however
take a while before clarity on several issues
emerges. In this environment, we continue to
prefer CPSUs which are relatively better positioned
on these front
Target price and recommendation
Current
Price (INR)
13
Target
Price (INR)
21
Upside
(%)
61.5
Reco.
Buy
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
0.7
1.6
Consensus
Forecast
1.1
2.4
Variation
(%)
-29.4
-32.7
Shareholding pattern (%)
Dec-13
Promoter
Domestic Inst
Foreign
Others
65.0
8.1
7.2
19.8
Sep-13
65.0
7.8
7.4
19.9
Dec-12
72.7
5.4
1.6
20.3
Stock performance (1-year)
5 February 2014
4

Jaiprakash Power
Financials and valuation
5 February 2014
5

Jaiprakash Power
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JAIPRAKASH POWER VENTURES LT
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