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Tata Power Ltd (updated - 12 Feb 2010)
Lower power generation and realisations saw Tata Power’s net sales in the December 2009 quarter dip 12 per cent year-onyear to Rs 1,528 crore. Operating income and net profits, however, surged 42 per cent and 28 per cent to Rs 364 crore and Rs 148 crore, respectively.

The dip in realisations can be attributed to passing of lower fuel costs to consumers, while the closure of two units in Trombay meant that power generation was flat in spite of 500 Mw of capacity added in 2009. Fuel costs per unit of electricity generated declined from Rs 3.31 in the December 2008 quarter to Rs 2.46 for the latest quarter.

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A change in fuel mix in favour of gas led to a 26 per cent saving in fuel costs. This was partly passed to consumers resulting in realisations falling 12 per cent yearon-year to Rs 4.1 a unit in the quarter from Rs 4.7 in the year ago period. Average tariffs for merchant sales also dropped to Rs 5.37-6.21 from Rs 5.5-6.5 in previous quarters, according to analysts. Operationally, generation and sales remained flat. Overall, Earnings Before Interest, Taxes, Depreciation and Amortization margins expanded 9.5 percentage points y-o-y to 26.8 per cent (led by savings in fuel costs), though they were lower by 265 basis points sequentially.

The company is on track to nearly double its generation capacity to 5,800 Mw by end of 2011-12. Most projects are on schedule with the Maithon plant scheduled for commissioning in 2010-11 and Mundra UMPP scheduled for 2011-12. The company has received approval for its mining plan in Mandakini coal block with most formalities already been completed. Coal production is expected to start from July 2011 according to analysts. The Tubed block mining proposal has also been approved and submitted to the state government. Production is targeted from February 2012.

Tata Power is seen as a quasi-coal play given its acquisition of stake in two Indonesian coal mines of Bumi group. Bumi mined 29.3 million tonnes at an average cost of $60 per tonne in the first half of 2009-10. Coal prices have firmed by 11 per cent to about $90 per tonne since November 2009, analysts say.

Consolidated numbers due later this month will therefore be an interesting watch. Another positive is afreeing up of about 500 Mw that was earlier supplied to Reliance Infra in Mumbai. About 200 Mw will be available for merchant trading and the rest will be sold on regulated basis from April 2010.

The stock has largely performed in line with the BSE Sensex since the beginning of 2010. It ended yesterday at Rs 1,265, down by Rs 10 over Wednesday’s closing, and trades at 15.4 times consensus analyst 2010-11 EPS estimates. Analysts value the stock at Rs 1,500 on sum-ofthe-parts basis which includes the company’s investments in Bumi (coal mines) and telecom among others, indicating that there is room for upside.
source - BS

Tata Power Ltd (updated - 05 Mar 2010)
While lower coal prices saw Tata Power’s consolidated revenues slip 6 per cent year-onyear to Rs 4,340 crore in the December quarter, high onetime expenses led to an 82 per cent fall in consolidated net profit to Rs 93 crore.

The quarter saw coal companies modify certain contracts relating to mining costs (including stripping) and reviewed the estimates of stripping costs deferred to future periods )subsequent to the receipt of an updated resource assessment technical report).

For Tata Power, this has resulted in a charge of Rs 370 crore during the quarter, including about Rs 300 crore for the period prior to the current financial year.

The performance of its subsidiaries — NDPL and Powerlinks — was healthy.

The two reported 45.5 per cent and 29.2 per cent year-on-year growth in revenues, respectively. But, despite the 60 per cent year-on-year increase in power trading volumes of Tata Power Trading Company to 1.1 billion units, its revenue and profit grew only 10 per cent and 12 per cent, respectively, as average realisations (led by lower fuel costs) fell 31 per cent to Rs 5.44 per unit.

Going ahead, Tata Power is mulling a 25 per cent increase in the mining capacity of its two Indonesian coal mines (it owns 30 per cent stake) to 75 million tonnes by the end of 2010-11. Hence, even as recurring mining costs are seen rising, a part of this pressure will be offset by higher coal production, say analysts.

While the recent Budget proposal for a clean energy cess on imported and domestic coal is likely to be passed on to customers, the increase in the minimum alternate tax is seen to have amarginal impact on the company.

Given that analysts have valued the stock at Rs 1,500 based on different valuation methods and the current price of Rs 1,333.40, there is room for limited upside.
source - BS