Hold Adani Power; target of Rs 27: Axis Direct

Axis Direct's research report on Adani Power

Q4 EBITDA at Rs 13.2 bn declined 50% YoY as (a) Adani Power (APL) did not recognize compensatory tariff (CT) at Mundra in Q4FY17 post recent Supreme court (SC) order (Total CT booked in Q4FY17 was Rs 2.5 bn vs. Rs 13.7 bn YoY) and (b) lower PLF at Mundra and Udupi due to tepid demand.

Outlook

We roll forward our TP to FY19E. We consider compensatory tariff at Tiroda / kawai and for Gujarat and Haryana PPA at Mundra. We model turnaround in FY18E via higher PLF, tad lower imported coal cost and CT at Tiroda, Kawai and Mundra (Haryana/ Gujarat PPA). We have a HOLD rating with TP Rs 27.