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Tata Power FY01: The light dims - Views on News from Equitymaster
 
 
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  • Jun 20, 2001

    Tata Power FY01: The light dims

    Tata Power, the country's largest private power producer has declared a 19% decline in FY01 net profit as compared to FY00. However, the company's topline showed a 21% growth vis-a-vis the previous year.

    (Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
    Sales 7,203 6,773 -6.0% 27,811 33,608 20.8%
    Other Income -132 867 -759.2% 2,386 2,899 21.5%
    Total expenditure 3,873 5,603 44.7% 19,466 26,852 37.9%
    Operating Profit (EBDIT) 3,330 1,170 -64.9% 8,345 6,756 -19.0%
    Operating Profit Margin (%) 46.2% 17.3%   30.0% 20.1%  
    Interest 610 764 25.3% 2,079 2,309 11.1%
    Depreciation 502 510 1.7% 2,018 2,046 1.4%
    Profit before Tax 2,087 762 -63.5% 6,634 5,300 -20.1%
    Tax 361 91 -74.9% 1,833 1,404 -23.4%
    Profit after Tax/(Loss) 1,726 671 -61.1% 4,801 3,896 -18.9%
    Net profit margin (%) 24.0% 9.9%   17.3% 11.6%  
    No. of Shares (eoy) (m) 115.6 115.6   115.6 197.9  
    Diluted no. of shares outstanding (m) 197.9 197.9   197.9 197.9  
    Earnings per share       24.3 19.7  
    Current P/e ratio         6.9  

    The results of FY00 and FY01 have been comparable by adding the FY00 financial results of erstwhile Andhra Valley, Tata Hydro and Tata Power and guaging it against the results declared by the new merged entity in FY01.

    Fuel costs hit profitability
    (Rs m) FY00 FY01 Change
    Cost of power purchased 3,737 4,013 7.4%
    Cost of fuel 11,710 16,875 44.1%
    Staff costs 1,286 1,353 5.2%

    The decline in profitability can be largely blamed on the company's fuel costs that escalated by 44% to Rs 16,875 m during FY01. If we remove the effect of the fuel costs then the company's profit before tax shows a 20% growth YoY.

    Profitability excluding fuel costs
    (Rs m) FY00 FY01 Change
    Operating profit 20,055 23,631 17.8%
    Profit before tax 18,344 22,175 20.9%

    In addition to the high fuel costs, the company's lacklustre 4QFY01 performance also contributed to the dismal showing. In 4QFY01 Tata Power's turnover declined 6% YoY and its profits slumped 61%. This despite a 75% decline in its tax provisioning.

    Notwithstanding the disappointing performance, FY01 was a landmark year fro Tata Power. This year all three Tata Electric Companies (Andhra Valley, Tata Hydro and Tata Power) got merged as one. The company acquired 100% stake in Tata Petrodyne Limited, which is engaged in oil and gas exploration and production. The company also initiated its presence in communication business by implementing the project for completing Mumbai fibre optic network. This project is slated to be commissioned by August 2001.

    The first 120 MW unit at Jojobera started commercial operations in February 2001. The 81.3 MW diesel generator based plant at Belgaum went on stream in March 2001 and is supplying power to the Karnataka Power Transmission Corporation. The first 24 MW replacement unit at the Khopoll hydro power station was also commissioned in March, 2001.

    During the year Chemical Terminal Trombay Limited (CTTL) also became a 72% subsidiary of the Tata Power company. CTTL is engaged in the business of storing and handling of oils and chemicals.

    At the current price of Rs 137 the stock trades at a P/E multiple of 6.9 times its FY01 earnings. The perfromance is below our expectations. We were expecting a 29% jump in the company's turnover and a 6% jump in its FY01 bottomline. The high fuel costs of the company continue to be a concern. We will have revise our numbers post these results. Though the stock has been holding strong in the past few sessions, it may weaken in light of the above performance. However, in the long term Tata Power is likely to be a good play on India's power sector.

     

     

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