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Jun 06, 2012, 03.07 PM IST | Source: Moneycontrol.com

Hold Lanco Infratech; target of Rs 15: Emkay

Emkay Global Financial Services has recommended hold rating on Lanco Infratech with a target of Rs 15, in its June 1, 2012 research report.

Emkay Global Financial Services has recommended hold rating on Lanco Infratech with a target of Rs 15, in its June 1, 2012 research report.

“Lanco Infratech, 4Q12 consolidated adjusted loss stood at Rs508mn against our estimates of Rs1.5bn of profit largely on account of (i) losses reported at Griffin (Rs824mn of negative EBIT) and (ii) 270bps sequential drop in EPC’s EBIT margins. Losses at Anpara (Rs1.4bn) and Udupi (Rs240mn) contributed as an associate for major part of the quarter. Reported net profit stood at Rs727mn after exceptional items of positive Rs1.9bn (including Rs1.2bn of forex gain) booked in quarter. 4Q12 generation stood at 3.9BU, up by 23% qoq and 60% yoy led by 1.2GW of capacity addition since 4Q11. Losses at Anpara were on account of under-recoveries due to PAF restricted by fuel handling related issues. Deferred tax provision of Rs320mn primarily led to losses at Udupi. In EPC business, EBIT margins have declined by 270bps qoq due to expensive closure of few projects including Anpara and Budhil in 4Q.”

“We cut our FY13E earnings estimates by 24% to Rs1.7/share against Rs2.3 earlier. Earnings cut is led by i) substantial increase in fuel cost and fuel handling related issues at Anpara, ii) lower margins in EPC business and iii) delay in COD of Kondapalli-III. We expect more backing down by states due to costly power on account of increase in fuel cost. This will lead to lower PLF in coming year. We introduce our FY14E earnings estimates at Rs2.6/share. FY14E factors in full year operation of Udupi and commissioning of Amarkantak-3, Vidarbha and Babandh. Stock has recently corrected sharply and is currently trading at 0.5x FY13E book. Despite low valuations, we understand that the future growth is contingent upon certain events especially like tariff approvals for Amarkantak and Udupi and gas supply for Kondapalli-III. We believe that clarity over the above issues will hold the key and drive the future earnings. We maintain Hold on the stock with revised price target of Rs15 (vs Rs17 earlier). Our revised target price factors in lower profitability in EPC segment and decline in PLF,” says Emkay Global Financial Services research report.     

Institutional holding more than 40% in Indian cos

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