Nov 13, 2012, 05.01 PM | Source: Moneycontrol.com
Emkay Global Financial Services has recommended hold rating on Lanco Infratech with a target of Rs 14 in its November 12, 2012 research report.
, Emkay Global Financial Services |
“Lanco Infratech’s, 2Q13 consolidated adjusted loss stood at Rs2.7bn against our estimate of Rs3.0bn of loss. Loss is largely on account of (i) just break even at Udupi, (ii) losses in Anpara (Rs1.3b), (iii) Rs114mn loss in Amarkantak and (iv) lower revenues and profits in EPC segment. Losses at Anpara were primarily on account of under recoveries due to lower plant availability factor. Coal handling related constraints at Anpara restricted its PAF. EPC segment revenues were significantly below estimates due to lower execution.”
“Lanco’s earnings visibility remain low and volatile driven by 1) tariff disputes, 2) too many variables going into different directions - difficult to forecast and 3) fuel supply and PPA issues. Though management expects tariff order on Udupi unit a by Dec and unit 2 by Jan to result in realizations of dues, the uncertainty on its profitability still there. Further clarity over Amarkantak-II is still awaited. Thus, the earnings are likely to remain volatile.”
“Lanco Infratech is currently trading at 0.5 x FY13E book which is an attractive valuations. However, upside is dependent upon (i) fuel supply especially at Kondapalli-II, (ii) tariff approvals for Amarkantak-II/Udupi, (3) clarity on Anpara fuel supply logistics, (4) production ramp up and cost reduction at Griffin and (5) control on cost overruns in EPC business projects. However, considering Lanco has multiple projects in problems, earnings visibility remain low and volatile. We maintain hold on with revised price target of Rs14/sh. Stake dilution at significantly higher valuations might lead to short term spikes in the stock price,” says Emkay Global Financial Services research report.
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