1 P a g e. Report By: Surbhi Bagaria Page 1

Transcription

1 1 P a g e Report By: Surbhi Bagaria surbhi@dynamiclevels.com Page 1

2 Torrent Power- Building new destination of possibilities Torrent Power Ltd.. 3 Business Areas Industry Outlook Overview of Co s Business Company Financials Shareholding Pattern Peer Comparison Investment Rationale Page 2

3 CMP Rs 182 Target: 225 FY17P/E: Torrent Power Ltd. Be it ambitious power generation projects or taking on the energy sufficiency challenge for the entire state; efficient distribution at the grass-root level or enabling a pulsating urban lifestyle; uninterrupted power supply to industries or 24X7 customer care initiatives. Torrent Power is all about transforming lives. Torrent Power is one of the leading brands in the Indian power sector, promoted by the Rs crore Torrent Group a group committed to its mission of transforming life by serving two of the most critical needs - healthcare and power. Torrent Pharmaceuticals Ltd., the flagship company of the Torrent Group, is a major player in the Indian pharmaceuticals industry with a vision of becoming a global entity in the arena. With an all-round experience in generation, transmission and distribution of power, and a proven track record of implementing large power projects, Torrent Power is the most experienced private sector player in Gujarat. Torrent Power foresaw the prospects in the power sector much before the liberalization, when it took-over an ailing power cable company in 1989 (now known as Torrent Cables Limited) and successfully turned it around. Chart Hypothesis: Above is the weekly price chart of TORRENT POWER for last 2 yrs, in which we can see that it made a new high of 252 recently and has corrected almost 30% from the high made in march. TORRENT POWER Share Price Performance EXCHANGE TORRENT POWER SYMBOL Current Price * 182 Face Value (Rs.) Week High (11- Mar-16) 52 Week Low (29- Jun-15) Life Time high (05-Jul- 10) Life Time low (28-Nov- 06) Average Daily 8.83 Movement Average Volume Month Return % P/E Ratio (x) Book Value Market Cap (Cr) % of Promoter 0 holding pledged COMPANY PROFILE OF TORRENT POWER Date of Incorporation 29-Apr-2004 Date of Listing 28-Nov-2006 Management Name Designation P K Taneja Additional Director Sudhir Mehta Chairman R Ravichandran Director Pankaj Patel Director Kiran Karnik Director Keki Mistry Director Samir Barua Director Sudhir Mehta Executive Chairman Samir Mehta Executive Vice Chairman Bhavna Doshi Independent Director Dharmishta Raval Independent Director Samir Mehta Vice Chairman Markand Bhatt Whole Time Director Jinal Mehta Whole Time Director Dharmishta Raval Independent Director Registered Office Address Torrent House,Off. Ashram Road,380009,Ahmedabad,Gujarat,India Page 3

4 Business Areas: Torrent Power, the Rs. 11,959 Cr. integrated power utility of the Torrent Group, is one of the largest private sector players in India having interests in power generation, transmission, distribution and manufacturing and supply of power cables. Torrent Power, along with its subsidiaries, has a portfolio of coal based, gas based and renewable power plants with an aggregate generation capacity of 3334 MW comprising: o MW Gas based SUGEN Mega Power Plant near Surat o MW Gas based UNOSUGEN Power Plant near Surat o 1200 MW Gas based DGEN Mega Power Plant at Dahej SEZ, near Bharuch o o 422 MW Coal based AMGEN Power Plant at Ahmedabad 182 MW Renewable capacity With under-construction wind power projects of 338 MW, the total renewable generation capacity (operational and under development) reaches to 520 MW. E-bid RLNG UNOSUGEN and DGEN Power Plant refrained from participating in the e-auction under Round 3 (i.e. for the period April 2016 to September 2016) of Scheme for utilisation of Gas based plants as the Scheme envisaged zero financial support to discoms and also allowed negative bidding. As a result, the corresponding concessions from the State Government became uncertain. In these circumstances, power generated under this Scheme no longer remained commercially viable or affordable to the discoms. GoI cancelled the auction for plants receiving Domestic Gas, hence SUGEN did not get any gas under the Scheme under Round 3. The gas based plants of the Company viz. Sugen, Unosugen & DGEN continued to receive supply of RLNG under the GOI s Scheme for utilisation of Gas based power generation capacity supported by Power system development Fund (PSDF) in Q Under Round 2 for the period 1st October, 2015 to 31th March, 2016 gas has been allocated to allow SUGEN to run at 35% PLF from the base level of 25.60% PLF, DGEN and UNOSUGEN to run on an average PLF of atleast 25.5%. Under Round 1 for the period 1st June, 2015 to 30th September, 2015, gas was allocated to allow SUGEN (plants receiving domestic gas) to run at 35% PLF from the base level of 25.60% PLF, and DGEN and UNOSUGEN (stranded plants) to run at 35% One of the lowest T&D losses in the country in Ahmedabad and Surat Distribution license areas 1st Company in India to be awarded Distribution Franchisee Gas arrangement for FY : In addition to tied up long term sources, for , based on Regulator s approval, it is proposed to: Buy Spot RLNG at competitive costs from the market; Import Spot LNG from international market Page 4

5 Industry Outlook: Power sector, a part of Infrastructure segment, is the fulcrum of economic development in any country. As evident from the existing power sector situation which has been adversely affected by domestic fuel shortages, the moot point is that supply side (coal / gas) needs to remain affordable i.e. what the market (consumer) can absorb as a cost. The power sector s identification as a key sector of focus to promote sustained industrial growth with emphasis on Make in India coupled with the Government s focus to attain Power For All is expected to accelerate the power demand in the country which is currently subdued. When this happens, the deficiency in power supply due to the current lull in launching new power projects and non-availability of affordable fuel will be felt with a much greater pinch. A) DEMAND SUPPLY GAP The energy deficit for the year has reduced to 3.6% against 4.2% in the previous year mainly due to steady rise in power availability. However, the peak deficit for FY has marginally increased to 4.7% as against 4.5% in FY The total short-term transactions, which form only 10% of total electricity generated, play an essential role in meeting seasonal or peaking demand. These short-term transactions have shown a decrease of 5.4% from 1,04,636 MUs in FY to 98,987 MUs in FY mainly due to weak demand and fragile health of State discoms. B) GENERATION As depicted in the chart, the installed power generation capacity of India in the last decade has more than doubled from 121 GW to 272 GW as on 31st March, 2015 with coal continuing to remain central in the fuel mix. Additionally, renewable sources gradually displaced hydro in the energy basket. Against the target installation of 88 GW (excluding renewables) around 61 GW capacity has been added in the first three years of the 12th Five Year Plan. Private sector has contributed a major share of 36 GW whereas the Central and State sectors could add only 12 GW each. While the capacity additions are positive, the sector has been continuing to face fuel shortages. The Plant Load Factor (PLF) of thermal power plants has decreased marginally from 63% in FY to 62% in FY However, the overall generation (excluding renewables) at 1,089 BUs in FY has shown an increase of 78 BUs over FY , a growth of 8%. C) TRANSMISSION The Transmission segment plays a key role in transmitting power continuously to various distribution entities across the country. The 12th Five Year Plan envisages an addition of about 1,07,440 ckm of transmission lines and 2,70,000 MVA of transformer capacity. Page 5

6 Out of this, 55,956 ckm transmission lines and 1,86,549 MVA of transformer capacity were added upto FY The total length of transmission lines and transformer capacity in the country is 3,13,437 ckm and 5,96,100 MVA respectively as on 31st March, D) DISTRIBUTION The Distribution segment continues to be the weakest link in the entire power value chain even after a decade of power sector reforms. Poorly maintained & overburdened distribution networks, inadequate metering and theft of electricity have kept Aggregate Technical & Commercial (AT&C) losses at a high level of around 25%. RENEWABLE ENERGY The Government is keen on making electricity from clean sources like sun, wind, water and biomass, a substantial part of the country s energy mix. With this commitment to keep the environment clean, various incentives offered and promotive measures taken in the Renewable energy segment include generation-based incentives, capital & interest subsidies, viability gap funding, concessional finance, fiscal incentives, Renewable Purchase Obligation (RPO), proposed Renewable Generation Obligation of at least 10% on new thermal generation plants, etc. As on 31st March, 2015, India s total renewable power capacity reached GW with wind energy continuing to lead the fleet with 66% share. During FY , capacity of 2.3 GW and 1.1 GW were added in wind energy and solar energy respectively. To harness the huge amount of untapped wind and solar potential, the Government has revised the target of renewable energy capacity addition to 175 GW till 2022, comprising majorly 100 GW solar and 60 GW wind. The Union Cabinet has approved several projects including the setting up of 25 solar parks each of 500 MW & above and solar UMPP, with a target of over 20,000 MW of solar power installed capacity within a period of 5 years. The wind and solar energy equipment prices have been falling dramatically due to technological innovation, increasing manufacturing scale and experience curve gains. It is hoped that such renewable energy will be sustainable in the long run on its own economic merit as compared to the current scenario where the renewable energy is highly incentivised through various measures. Needless to state, that despite the welcome developments in the renewable segment, the thermal energy will continue to have a prime place in sustaining the economic development of the country. Page 6

7 OVERVIEW OF COMPANY S BUSINESS during the year: GENERATION: A) SUGEN Mega Power Plant near Surat The 1,147.5 MW gas based SUGEN Mega Power Plant achieved a Plant Availability Factor (PAF) of 98.12% (Previous Year %). PLF increased to 25.70% (Previous Year %) due to higher gas supply under its long term contracts and judicious usage of spot LNG. Non-availability of domestic gas and unwillingness of long term buyers to off-take power based on expensive imported LNG resulted in nonoperation of two units during the year. Consequently, it dispatched 2,518 MUs (Previous Year - 2,230 MUs). SUGEN has participated in the Scheme for utilization of Gas based power generation capacity by submitting bid for allotment of RLNG up to the target PLF and related Power System Development Fund support from the Government. SUGEN has received the interim true-up order covering the tariff period and is awaiting the final true-up order. B) UNOSUGEN Power Plant near Surat The MW gas based UNOSUGEN Power Plant achieved PAF of 90.30% (Previous Year 99.99%) due to forced outage. The capacity of the unit remained unutilised throughout the year owing to non-availability of domestic gas and reluctance of beneficiaries to off-take power based on expensive imported LNG. C) DGEN Power Plant at Dahej SEZ near Bharuch The 1,200 MW combined cycle gas based DGEN Power Project has been commissioned during the year. The Project has been developed by Torrent Energy Limited (TEL), a wholly owned subsidiary of the Company. TEL holds the status of Co-Developer of Dahej SEZ area granted by the Ministry of Commerce and Industry. As per the EPC Contract, the Company has received 708 Crore towards the recovery of Liquidated Damages for the time delay and other Project related claims, from Siemens India and Siemens AG which has helped in reducing the Project Cost. On considering the cost of `272 Crore of DGEN Navsari 400 kv transmission line developed by TEL alongwith the above mentioned additional works, the total Project cost stands at `5,699 Crore. The Plant is awaiting gas allocation and is currently under preservation mode. D) AMGEN Power Plant at Ahmedabad The 422 MW coal based AMGEN Power Plant achieved a higher PAF of 90.05% (Previous Year %), PLF of 80.69% (Previous Year %) and dispatched 2,718 MUs (Previous Year - 2,463 MUs). The improvement in PAF was due to uprating activities of E & F stations carried out in the previous year which also led to improved PLF and dispatch of units. 100 MW Vatva CCPP has been retired and sale order for the Plant has been placed. Page 7

8 E) Wind Power Plant at Lalpur, Jamnagar The 49.6 MW Wind Power Plant achieved PAF of 97.60% (Previous Year %) and dispatched 87 MUs (Previous Year - 89 MUs) during the year. F) Solar Power Plant at Charanka, Patan 51 MW Solar Power Project has been commissioned during the year in a cost effective manner. The Project has been developed by Torrent Solargen Limited (formerly known as Torrent Power Bhiwandi Ltd.), a wholly owned subsidiary of the Company. Power generated from the Plant has been tied up for supplying to Company s Distribution business in Ahmedabad and Surat for fulfilment of solar RPO. F) Solar Power Plant at Charanka, Patan 51 MW Solar Power Project has been commissioned during the year in a cost effective manner. The Project has been developed by Torrent Solargen Limited (formerly known as Torrent Power Bhiwandi Ltd.), a wholly owned subsidiary of the Company. Power generated from the Plant has been tied up for supplying to Company s Distribution business in Ahmedabad and Surat for fulfilment of solar RPO. Page 8

9 Company Financials INCOME STATEMENT( In Cr) Mar-14 Mar-15 Mar-16 Net Sales/Income from operations 11, , , Other Operating Income Total Income From Operations 11, , , Increase/Decrease in Stocks Consumption of Raw Materials Purchase of Traded Goods Power And Fuel 7, , , Employees Cost Depreciation Other Expenses Total Expenditure 9, , , Operating Profit 2, , Other Income P/L Before Int., Excpt. Items & Tax 2, , Interest 1, P/L Before Exceptional Items & Tax 1, Exceptional Item P/L Before Tax 1, Tax P/L After Tax from Ordinary Activities PAT Minority Interest Net Profit/(Loss) For the Period Prior Year Adjustments Equity Share Capital Reserves 7, , , EPS (Rs.) The major reasons for variation in FY results as compared to FY results (other than as mentioned in the notes to the financial results): Recovery of partial fixed cost of its DGEN and UNOSUGEN power plants due to availability of gas under the Scheme for Utilisation of Gas Based Power Generation Capacity issued by Ministry of Power Recovery of arrears of unrecovered FPPPA for FY Depreciation and Interest cost pertaining to DGEN Plant The major reasons for variation in Q4 FY results as compared to Q4 FY results: One off items (net) in Q : Other operating income including on account of savings consequent to renegotiation of certain terms of long term contracts (Rs. 229 Cr.) One off items in Q including merger related expenses (Rs. 75 Cr.) Note: The figures for Q & FY are after giving effect of Amalgamation, whereas the figures for Q4 FY & FY are as reported earlier and hence to that extent are not comparable. Page 9

10 Balance Sheet (In Mn) FY 2014 FY 2015 FY 2016 Total Current Assets 41,063 41,464 33,401 Cash & Near Cash Items 8,155 11,356 7,797 Short Term Investments 16,000 12,313 5,039 Accounts & Notes Receivable 8,036 8,924 10,570 Inventories 2,902 2,597 4,174 Other Current Assets 5,970 6,274 5,822 Total Long-Term Assets 150, , ,555 Long Term Investments ,286 Gross Fixed Assets 175, ,696 Accumulated Depreciation 28,579 35,663 Net Fixed Assets 147, , ,163 Other Long Term Assets 3,074 1, Total Current Liabilities 22,819 27,741 17,148 Accounts Payable 6,354 6,339 7,353 Short Term Borrowings 7,189 10,988 0 Other Short Term Liabilities 9,276 10,414 9,795 Total Long Term Liabilities 106, , ,146 Long Term Borrowings 87,446 82,559 82,437 Other Long Term Borrowings 18,642 20,161 20,709 Total Liabilities 128, , ,294 Long Preferred Equity Minority Interest Share Capital & APIC 4,725 4,725 4,806 Retained Earnings & Other Equity 57,329 60,832 70,546 Total Shareholders Equity 62,349 65,865 75,662 Total Liabilities & Equity 191, , ,956 Book Value Per Share Tangible Book Value Per Share Current liabilities have decreased by Rs Cr mainly due to decrease in Provision for Current Tax Rs. 118 Cr. Current maturities of long term debt by Rs. 668 Cr Capital creditors pertaining to projects Rs. 234 Cr. Non-Current Assets have increased by Rs. 770 Cr mainly due to increase in net fixed assets Rs. 205 Cr., increase in Capital advances Rs. 308 Cr., advances for goods and services Rs. 259 Cr. (for Regasification agreement with PLL) Current Assets have decreased by Rs. 807 Cr mainly due to decrease in fixed deposits Rs. 986 Cr., increase in trade receivables Rs. 165 Cr. Page 10

11 Cash Flows FY 2013 FY 2014 FY 2015 Net Income 3,867 1,053 3,597 Depreciation & Amortization 4,272 5,544 7,205 Other Non-Cash Adjustments 825 (1,668) (2,071) Changes in Non-Cash Capital 3, ,572 Cash From Operating Activities 12,099 5,335 12,303 Disposal of Fixed Assets Capital Expenditures (32,733) (11,973) (13,796) Increase in Investments (10) (13) (13) Other Investing Activities (5,309) 1, Cash From Investing Activities (38,003) (10,194) (13,060) Dividends Paid (1,914) (1,166) (321) Change in Short Term Borrowings 1,618 (1,618) 1,096 Increase in Long Term Borrowings 36,503 36,492 5,382 Decrease in Long Term Borrowings (11,912) (21,069) (7,667) Other Financing Activities 940 1,295 1,149 Cash From Financing Activities 25,235 13,935 (361) Net Changes in Cash (669) 9,076 (1,119) Free Cash Flow (CFO-CAPEX) (20,634) (6,638) (1,493) Free Cash Flow To Firm (17,981) (3,898) 3,220 Free Cash Flow To Equity 5,623 7,211 (2,513) Free Cash Flow per Share (43.67) (14.05) (3.16) Current Capitalization (Millions ) Share Price (inr) Shares Out Market Capitalization (inr) 84,925.0 Cash & Short Term Investments 12,835.7 Total Debt 82,437.4 Pref. Equity 0.0 Total Minority Interest Total Enterprise Value (inr) 154,837.2 Book Value of Common Equity 75,351.7 Pref. Equity 0.0 Total Minority Interest Total Debt 82,437.4 Total Capital 158,099.6 Page 11

12 Ratio Analysis FY 2013 FY 2014 FY 2015 FY 2016 Valuation Ratios Price Earnings EV to EBIT EV to EBITDA Price to Sales Price to Book Dividend Yield Profitability Ratios Gross Margin EBITDA Margin Operating Margin Profit Margin Return on Assets Return on Equity Leverage & Coverage Ratios Current Ratio Quick Ratio Interest Coverage Ratio (EBIT/I) Tot Debt/Capital Tot Debt/Equity Others Asset Turnover Accounts Receivable Turnover Accounts Payable Turnover Effective Tax Rate Page 12

13 WACC FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Equity Cost of Equity 10.5% 9.6% 11.4% 12.6% 11.7% Weight of Equity 63.8% 44.8% 31.9% 45.2% 57.5% Debt Cost of Debt 8.7% 6.7% 4.8% 5.2% 7.2% Weight of Debt 36.2% 55.2% 68.1% 54.8% 42.5% Preferred Equity Cost of Pref Equity Weight of Pref Equity 0.0% 0.0% 0.0% 0.0% 0.0% WACC 9.8% 8.0% 6.9% 8.6% 9.8% Capital Structure FY 2013 FY 2014 FY 2015 FY 2016 Millions % of Millions % of Millions % of Millions % of Total Total Total Total Hist Market Cap 65, % 44, % 77, % 111, % ST Borrowings 20, % 7, % 10, % % LT Borrowings 60, % 87, % 82, % 82, % Pref Equity % % % % Total Capital 145, % 139, % 170, % 193, % Debt Summary FY 2013 FY 2014 FY 2015 FY 2016 Millions % of Total Millions % of Total Millions % of Total Millions % of Total General/Other 80, % 94, % 93, % 82, % Borrowings Total Principal Due 80, % 94, % 93, % 82, % Total Debt Outstanding 80, , , ,437.4 Additional Totals Total Cash & ST 14, % 24, % 23, % 12, % Investments Net Debt 65, % 70, % 69, % 69, % Total Short-Term 20, % 7, % 10, % % Borrowings Curr. Port. of LT 18, % 7, % 9, % % Debt/Cap. Leases Long-Term Debt (Incl. Cap. Leases) 60, % 87, % 82, % 82, % Page 13

14 Shareholding Pattern: Shareholding Pattern Mar-16 Dec-15 Sep-15 Jun-15 Mar-15 Promoter and Promoter Group (%) Indian Foreign NIL NIL NIL NIL NIL Institutions (%) FII DII NonInstitutions (%) Bodies Corporate NIL NIL Others Custodians NIL NIL NIL NIL NIL Total no. of shares (cr.) Page 14

15 Peer Comparison: Price 52 Week High 52 Week Low Net Profit Net Sales Mcap Movt From 52 Week Low TORRENT POWER % CESC % NEYVELI LIGNITE % PTC % TATA POWER % Above is weekly chart of Nifty and below is Torrent Power, Nifty and torrent Power are inversely related Torrent Power hit 52 week high when market was at 52 week low Page 15

16 Investment Rationale The Company continues to believe in its play of being an integrated utility. It has positioned itself well even in difficult times as compared to its peers with its balanced portfolio. As part of its future growth plan - The Company continuously explores opportunities in the coal based generation space either Greenfield or brownfield. It is also working towards further expanding its renewable energy portfolio Most of the states are suffering from poor financial health and they are increasingly looking for franchise and other related models. After the success of the Bhiwandi distribution franchise model, some of the states are interested in private participation in their distribution circles. Hence, opportunities for the Company are also lying in the distribution area. Bhiwandi franchisee model is a unique public-private partnership and is a role model for distribution reforms in the country. The overall growth in the eight core industries has dropped to 3.5% during FY as compared to 4.2% in FY The Government has recognised the need to revive infrastructure and has been enthusiastic to reverse the declining growth trend. Actual capex for FY16: Rs. 748 crores. Regulatory Capex (AMGEN, TPL-D, Dahej Distribution) GERC related TPL-D: Rs. 573 crores Dahej Distribution: Rs. 5 crores Total: Rs. 597 crores AMGEN: Rs. 19 crores Non-regulatory Capex Non GERC related: Rs. 151 crores AMGEN is the embedded power plant for Ahmedabad distribution. Entire 422 MW of power from AMGEN plant is supplied to Ahmedabad distribution. SUGEN plant has a power selling arrangement of 835 MW (net) with TPL-D (Ahmedabad, Gandhinagar and Surat) which has been approved by GERC. Power purchase arrangement of TPL-D with UNOSUGEN (278 MW) and DGEN (450 MW) plants is expected to be approved by GERC in due course of time. The Company is planning for import / purchase of LNG for its Gas based plants to meet with demand of TPL-D. Further demand of TPL-D will be judicially met by power from gas based units and short term purchase / purchase from GUVNL / power exchanges etc.. DGEN plant has a power selling arrangement of 400 MW with Dahej distribution which is expected to be approved by GERC in due course of time based on fuel availability. The current contracted demand of Dahej distribution is approx MW which is met by purchase from GUVNL as approved by GERC. We recommend BUY in Torrent 180 with the Target of 225 as Torrent Power is one of the leading brands in the Indian power sector, and is engaged in the business of power generation, transmission and distribution of electricity with operations in the states of Gujarat, Maharashtra and Uttar Pradesh and is continuously expanding its capacity. Page 16

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