Arihant Capital recommended hold rating on Adani Power with a target price of Rs 29 in its research report dated May 04, 2016.
Arihant Capital's research report on Adani Power
Adani Power’s (APL) reported Q4FY16 profit of INR11.7bn included prior period compensatory tariff/change in law component and certain one-time reversals. Improvement in operational performance apart from improving PLFs across plants also includes sharp reduction in past receivables (>3 years) in Udupi plant by INR 12bn. To address the cash flow constraints (owing the delay in recovering compensatory tariff (CT)) the company apart from concluding 5/25 refinancing across all its projects, has also resorted to equity infusion from promoters. Improvement in coal supplies and recovery of CT are critical. Maintain ‘HOLD’ with target price of INR29.
APL has been managing cash flows by resorting to the 5/25 scheme given the delay in implementation of CT (INR72bn booked till date which is currently part of INR94bn debtors). Higher domestic coal supply and early resolution of CT (along with retrospective recovery) are critical for revival of the company. At CMP, the stock trades at 1.2x FY17E and 1.1x FY18E P/BV. We maintain ‘HOLD/SU’ with SOTP-based target price of INR29 (INR24 earlier).
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