CMP: Rs 60.90
Target: Rs 4
In 3QFY13, sales increased 25 per cent q-o-q but PAT at (Rs 620 crore) declined by 127 per cent q-o-q. Sequential increase in sales revenue is attributed to 36 per cent q-o-q increase in units sold, which offsets 8 per cent q-o-q decline in the average unit sale price at Rs3.36.
We have revised our FY13 estimates to mainly factor-in 1) equity dilution by 9.8 per cent; and 2) increase in interest and depreciation costs owing to changes in the commissioning schedule and increase in effective interest costs.
We do not see any positive triggers for stock to be re-rated in the near-term as cash flows would be under stress owing to 1) higher dependence on spot coal market; 2) weak rupee leading to realised forex losses; 3) increase in fixed price PPA sales of 2.4GW in FY13E; 4) technical snags faced in stabilising some units; and 5) subdued merchant realisations which cap incremental earnings.
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