Tata Power Company has declared an encouraging 12% growth in topline in FY02. A resurgent 18% growth in 4QFY02 topline has helped the company achieve this. Its bottomline surged 30% during the year aided by significant extraordinary income.
Operating Profit (EBDIT)
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Diluted no. of Shares (eoy) (m)
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Profit growth includes profit on sale of long term investments (Rs 914 m), which is mainly on account of sale of equity shares of Tata Liebert, Tata BP Lubricants and units of US - 64 scheme of Unit Trust of India. Excluding this component, the bottomline would have shown a growth of 9% YoY. Higher interest and depreciation burden have also taken a toll on the company's profitability. Added to this, around 54% of the tax liability in FY02 is deferred tax liability.
The surge in 4QFY02 topline comes largely in the wake of commissioning the 120 MW capacity at Jojobera (second phase ) in December 2001. Another 37.5 MW plant at Wadi is likely to come up by June 2002. Considering the fixed return on capital, on which the power business in India operates, this should add to its bottomline progressively.
Sale of electricity
During FY02 Tata Power saw nearly 18% growth in generation to 11,782 MUs. Sale of electricity was up by over 19% to 11,107 MUs. An 87% surge in CPP generation led the topline growth. Its captive power generation (CPP) capacity is slated to zoom from 1,459 MUs in FY02 to around 2,000 MUs by FY03.
The company's oil exploration business has also done well. Tata Petrodyne has earned Rs 440 m as revenues and contributed Rs 125 m to Tata Power's bottomline. The company's telecom and broadband business continue to be a drain (estimated loss Rs 500 m).
We had projected a 16% growth in FY02 topline. The company sold electricity at an average realisation of Rs 3.4 per unit during FY02 as compared to approximately Rs 3.5 per unit last year, which may have affected our projections. We had also projected a higher bottomline growth at 35% in FY02 (including extraordinary income). We anticipate a dip in profits in FY03, which is excluding any extraordinary income that may arise.
At the current price of Rs 114 the stock trades on a P/E of 8.9x FY02 earnings. The coming year will be good for Tata Power in terms of its power business. However, telecom is likely to be the problem area in terms of profitability. Also, Tata Power is an 18% owner of VSNL and may have to use its resources to further develop VSNL businesses.
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