¾ Lanco has reported a consolidated loss of Rs2.6bn – mainly
due to (1) Amarkantak reporting marginal loss vs. Rs1.7bn
profit qoq and (2) Rs2.8bn forex loss (griffin, EPC and power).
¾ Adjusted consolidated loss, after adjusting for (1) forex
losses of Rs2.8bn and (2) exceptional gain of Rs489mn, stood
at Rs205mn vs. expectations of profit of Rs883mn –
significantly below mainly due to Amarkantak loss
¾ Further delay in Udupi and Anpara COD (4Q12-1Q13). Cut
earnings by 70/31% in FY12E/13E - driven by delays, higher
fuel cost and Amarkantak lower tariffs
¾ Issues persist - (1) fuel, (2) Udupi and Anpara delays, (3)
perdaman case, (4) inv. planned in solar despite stretched
BS, (5) gas plants merchant & (6) int. rates; maintain hold
Reported loss due to forex and Amarkantak
Lanco has reported a consolidated loss of Rs2.6bn – mainly due to (1) Amarkantak
reporting marginal loss vs. Rs1.7bn profit qoq and (2) Rs2.8bn forex loss (griffin, EPC
and power). Adjusted consolidated loss, after adjusting for (1) forex losses of Rs2.8bn
and (2) exceptional gain of Rs489mn, stood at Rs205mn vs. expectations of profit of
Rs883mn – significantly below mainly due to Amarkantak loss. EPC business has done
well with revenues (before elimination) doubling yoy and growing by 26% qoq. EPC
margins have also improved to 19.4% in 2Q vs. 16.7% qoq and 12.3% yoy. However,
elimination has increased to 63% from 38% yoy and is higher than our estimate of 60%.
For 1HFY12 consolidated EPS is almost nil.
Delays, higher fuel cost and lower Amarkantak tariffs - Cut earnings
We factor in the delays in Udupi and Anpara to 4Q12-1Q13 commissioning now.
Further, we are factoring in (1) higher fuel cost for its coal/gas based plants and (2)
lower tariffs for Amarkantak II after the recent order. All this combined leads to
significant cut in our earnings by 70/31% for FY12E/FY13E. We do not rule out further
cuts as the assumption still are on the higher side mainly based on guidance.
Issues still persist; maintain hold
Lanco has corrected significantly due to various issues in recent times – (1) domestic
fuel shortage and plants on domestic fuel, (2) Udupi and Anpara Delays, (3) Perdaman
case, (4) rising interest rates and stretched balance sheet, (5) huge investments
planned in solar despite stretched balance sheet and (6) gas supply issues and gas
plants kept merchant. We believe that most of these issues still persist and will take
time to get resolved and to remain overhang despite valuations at 0.5xFY12E Book.
Maintain hold rating with a revised price target of Rs17/Share (earlier Rs23/Share).
due to (1) Amarkantak reporting marginal loss vs. Rs1.7bn
profit qoq and (2) Rs2.8bn forex loss (griffin, EPC and power).
¾ Adjusted consolidated loss, after adjusting for (1) forex
losses of Rs2.8bn and (2) exceptional gain of Rs489mn, stood
at Rs205mn vs. expectations of profit of Rs883mn –
significantly below mainly due to Amarkantak loss
¾ Further delay in Udupi and Anpara COD (4Q12-1Q13). Cut
earnings by 70/31% in FY12E/13E - driven by delays, higher
fuel cost and Amarkantak lower tariffs
¾ Issues persist - (1) fuel, (2) Udupi and Anpara delays, (3)
perdaman case, (4) inv. planned in solar despite stretched
BS, (5) gas plants merchant & (6) int. rates; maintain hold
Reported loss due to forex and Amarkantak
Lanco has reported a consolidated loss of Rs2.6bn – mainly due to (1) Amarkantak
reporting marginal loss vs. Rs1.7bn profit qoq and (2) Rs2.8bn forex loss (griffin, EPC
and power). Adjusted consolidated loss, after adjusting for (1) forex losses of Rs2.8bn
and (2) exceptional gain of Rs489mn, stood at Rs205mn vs. expectations of profit of
Rs883mn – significantly below mainly due to Amarkantak loss. EPC business has done
well with revenues (before elimination) doubling yoy and growing by 26% qoq. EPC
margins have also improved to 19.4% in 2Q vs. 16.7% qoq and 12.3% yoy. However,
elimination has increased to 63% from 38% yoy and is higher than our estimate of 60%.
For 1HFY12 consolidated EPS is almost nil.
Delays, higher fuel cost and lower Amarkantak tariffs - Cut earnings
We factor in the delays in Udupi and Anpara to 4Q12-1Q13 commissioning now.
Further, we are factoring in (1) higher fuel cost for its coal/gas based plants and (2)
lower tariffs for Amarkantak II after the recent order. All this combined leads to
significant cut in our earnings by 70/31% for FY12E/FY13E. We do not rule out further
cuts as the assumption still are on the higher side mainly based on guidance.
Issues still persist; maintain hold
Lanco has corrected significantly due to various issues in recent times – (1) domestic
fuel shortage and plants on domestic fuel, (2) Udupi and Anpara Delays, (3) Perdaman
case, (4) rising interest rates and stretched balance sheet, (5) huge investments
planned in solar despite stretched balance sheet and (6) gas supply issues and gas
plants kept merchant. We believe that most of these issues still persist and will take
time to get resolved and to remain overhang despite valuations at 0.5xFY12E Book.
Maintain hold rating with a revised price target of Rs17/Share (earlier Rs23/Share).
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