UBS Investment on ADANI ENTERPRISES

Adani Enterprises is expected to get a fillip from the power business. We believe its power business earnings will grow rapidly (from our estimated PAT of Rs4.8bn in FY10 to Rs60.5bn in FY14), which would be a big positive. In addition to commissioned/under-execution 6,600 MW of capacity, Adani Power (APL) has 3,300 MW under development and 5,280 MW under planning. Given that the additional developments are largely at the same sites and its execution capabilities, we expect newsflow to remain robust. Moreover, the company has developed a large contract-mining portfolio with peak mining capacity of 70mtpa. There are many upcoming opportunities in the sector as other state electricity boards (SEBs) adopt the route of private sector contract mining and existing SEBs offer more contracts. We view it as more as a conglomerate as compared to the other holding companies. We set the twelve month’s price target at Rs 550 per share.

CLSA on Adani Power

CLSA initiates coverage on Adani Power with an `Underperform’ rating. Adani Power is setting up a 6,600-MW power capacity, which will make it one of the largest private sector players by FY13. It has 70% power tied up in Case 1 bids and the balance 30% will be sold on merchant basis. Additional merchant sales before the start of long term PPAs are contingent on timely commissioning of projects.

With strong capacity addition over the next three years, Adani Power has 6,600-MW capacity under development which is targetted to be fully commissioned by FY13. This will make Adani one of the largest private sector players in power generation. The company has plans to add more capacity in Gujarat at Dahej (1,980MW) and in Rajasthan at Kawai (1,320MW) and expand its Tiroda project to 3,300MW. CLSA believes the capacity ramp up/ risks associated with coal supplies from Indonesia/ merchant tariffs are going to be the key for the stock performance. CLSA has given the company the benefit of doubt regarding the budget proposal of imposing a duty on power imported from SEZs to DTA (domestic tariff area), however, there is a MAT rate for taxation for the company even though the company’s assessment is that it will have zero tax liability for the initial 10 years under the SEZ Act.