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Tata Power: Generation strength - Views on News from Equitymaster
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  • May 31, 2002

    Tata Power: Generation strength

    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.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Sales 7,073 8,357 18.2% 34,051 38,028 11.7%
    Other Income 568 700 23.2% 2,373 2,649 11.6%
    Expenditure 5,603 6,504 16.1% 26,852 29,070 8.3%
    Operating Profit (EBDIT) 1,470 1,853 26.0% 7,199 8,958 24.4%
    Operating Profit Margin (%) 20.8% 22.2%   21.1% 23.6%  
    Interest 764 775 1.5% 2,309 2,986 29.3%
    Depreciation 511 715 40.0% 2,046 2,817 37.7%
    Profit before Tax 763 1,063 39.2% 5,218 5,805 11.2%
    Extraordinary income 2 30 - 83 914 -
    Tax 91 414 355.8% 1,404 1,636 16.5%
    Profit after Tax/(Loss) 674 679 0.7% 3,896 5,082 30.4%
    Net profit margin (%) 9.5% 8.1%   11.4% 13.4%  
    Diluted no. of Shares (eoy) (m) 197.9 197.9   197.9 197.9  
    Diluted Earnings per share* 13.6 13.7   19.7 25.7  
    Current P/e ratio   8.3     8.9  

    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.

    Power growth...
    MUs 4QFY01 4QFY02 Change FY01 FY02 Change
    Generation 2210 2748 24.3% 10031 11782 17.5%
    Sale of electricity 1963 2609 32.9% 9324 11107 19.1%

    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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