Edelweiss recommended hold rating on Adani Power with a target price of Rs 28 in its research report dated January 20, 2017.
Edelweiss' research report on Adani Power
Adani Power’s (APL) Q3FY17 net loss of INR3.23bn exceeded our and Street’s expectations, resulting in the stock plummeting 10%. Key reason for the miss was lower volume off take and non-availability of domestic coal. As in the previous quarter, APL booked compensatory tariff (CT) of INR4.8bn which was lower than previous quarters. Going forward, while operational performance could recover key upside hinges on ratification of CERC’s CT order by the Supreme Court (SC). We maintain ‘HOLD’ with a SoTP-based target price of INR28.
APL’s performance is expected to further improve with commencement of the 440MW PPA at Tirora, better coal supplies at Kawai and uptick in Udupi’s PLF. However, early resolution of CT (along with retrospective recovery) for which hearings have been completed is critical for revival of cash flows. At CMP, the stock trades at 1.2x each FY17E and FY18E P/BV. We maintain ‘HOLD/SU’ with SoTP-based target price of INR28.
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First Published on Jan 23, 2017 04:36 pm