The document provides a preview of expected quarterly financial results for utility companies in India. It is expected that aggregate revenue will grow 4% YoY while profit will decline 9% YoY mainly due to lower profits at Coal India. Generation growth was up 12% YoY in July-August due to economic recovery and improved coal supply. Power deficit remained around 4% as demand grew 9-13% YoY and supply increased 10% YoY. Imported coal prices declined slightly QoQ while domestic short-term prices increased. The document recommends preferring insulated players like CESC and Indiabulls Power given current issues around PPAs, fuel, and tariffs.

1. September 2014 Results Preview | Sector: Utilities
September 2014 Results Preview | October 2014
Utilities
Discoms financials, fuel, PPA rejig key issues
Prefer insulated players; NTPC, Powergrid, CESC, Indiabulls Power remain our top
picks
We expect utility companies in our coverage to report aggregate 2QFY15 revenue
growth of 4% YoY and PAT de-growth of 9% YoY. PAT de-growth will mainly be
driven by Coal India’s lower profitability on lesser e-auction volumes. Also, NTPC and
PTC India would report lower profits YoY. Powergrid is expected to record robust
earnings growth of 22% YoY led by capitalization.
Generation growth buoyant, coal projects’ PLF shows positive growth: In
July/August 2014, all India generation grew at 12% YoY – led by 13% YoY growth in
July and 9% YoY growth in August 2014. Weak monsoon, improved generation from
captive fuel-based projects such as Sasan, Raj West and higher domestic coal supply
led to higher generation growth. Overall PLF for July/August 2014 grew to 55.5% v/s
54.5% (YoY). Coal project PLF over the same period saw an improvement and stood
at 62.5% v/s 58.6% YoY. For YTD FY15, gas-based generation de-grew by 6.5% YoY
and PLF stood at 22% v/s 26% YoY. Nuclear power grew by 5% on account of higher
PLF, while hydro power de-grew by 3% YoY in YTD FY15.
Power deficit remains muted: Power demand for July and August 2014 grew by
9% and 13% YoY, respectively. This is partly due to a lower base and possible
recovery. Over the same period, power supply increased by ~10% YoY, leading to a
base deficit at ~4%. Southern region registered significant improvement, with the
deficit reducing to 5.3% YTD FY15 v/s 9.7% YoY.
Imported coal prices lower QoQ, ST prices firm: Imported coal average prices
for the quarter stood at USD71/t, compared to USD73/t YoY and USD75/t QoQ. Post
the 3QFY14 increase, global coal prices softened again. Short term price at IEX has
looked up QoQ and the average stood at INR4.01/unit in 2QFY15 v/s INR3.6/unit in
1QFY15. This is due to the recent pickup in economy, which led to higher demand,
especially from industrial and agricultural sectors.
Company name
CESC
Coal India
JSW Energy
NHPC
NTPC
Power Grid Corporation
PTC India
Reliance Infrastructure
Tata Power
Expected quarterly performance summary (INR Million)
Sector CMP
Sales (INR m) EBDITA (INR m) Net Profit (INR m)
(INR)
30.9.14
Reco. Sep-14
Var %
YoY
Var %
QoQ
CESC 749 Buy
15,790 -3.2 -15.2
3,840 2.1 1.6
1,746 2.1 15.6
Coal India 341 Neutral
148,866 -3.4 -16.4
14,916 -46.6 -65.2
21,823 -28.7 -45.7
JSW Energy 71 Neutral
24,140 19.2 -5.6
8,083 -3.5 -10.8
2,987 29.2 -8.2
NHPC 20 Neutral
19,602 18.8 -4.6
13,802 35.5 4.8
8,301 7.2 11.1
NTPC 139 Buy
172,262 5.9 -4.8
37,194 -9.5 13.8
19,008 -13.6 -3.6
Power Grid Corp. 135 Buy
42,132 5.8 7.0
35,782 6.1 6.2
12,785 22.5 7.4
PTC India 85 Buy
43,408 38.2 17.7
530 -21.9 -7.2
491 -20.7 12.1
Reliance Infrastructure 585 Buy
23,750 -16.1 -6.3
5,750 20.6 33.6
3,588 3.7 11.6
Tata Power 83 Neutral
89,043 1.6 1.9
23,835 17.4 36.4
3,299 30.6 32.2
Utilities Sector Aggregate 578,993 3.9 -5.5 143,732 -4.7 -8.8 74,027 -9.1 -17.9
Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982 5429
Mihir Shah (Mihir.Shah@MotilalOswal.com); +91 22 3089 6693
Sep-14
Var %
YoY
Var %
QoQ
Sep-14
Var %
YoY
Var %
QoQ
Source: Company, MOSL
October 2014 274

2. September 2014 Results Preview | Sector: Utilities
SC de-allocates coal blocks: The Supreme Court has de-allocated 214 blocks of
the 218 allotted to various companies since 1993. Timeline for handing over the
mines and completion of related modalities is till March 2015. Also, the current
judgment recommends a payment of INR295/t as additional levy for every ton of
coal mined from the start of captive coal block till March 2015. Though this may
create near-term hiccups, it streamlines the process of usage and pricing of coal for
all sectors, pertinently power in the longer term.
Valuation and view: We continue to prefer CPSUs which are better placed in the
current uncertain environment of PPA, fuel and tariff. We rate NTPC and Powergrid
as the top picks in the sector. Among IPPs, we prefer CESC and IBPOW, being
relatively insulated from the current crisis.
Relative Performance - 3m (%)
Sensex Index MOSL Utilities Index
Jun-14 Jul-14 Aug-14 Sep-14
Source: Bloomberg, MOSL
Relative Performance - 1 Year (%)
Sensex Index MOSL Utilities Index
Sep-13 Dec-13 Mar-14 Jun-14 Sep-14
Source: Bloomberg, MOSL
110
105
100
95
90
85
140
125
110
95
80
Comparative Valuation
Sector / Companies CMP Reco. EPS (INR) PE (x) EV/EBITDA (x) RoE (%)
(INR) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
Utilities
CESC 749 Buy 56.0 61.2 66.2
13.4 12.2 11.3 8.2 7.4 6.6 11.0 10.9 10.7
Coal India 341 Neutral 26.0 28.9 32.4
13.1 11.8 10.5 9.0 7.6 6.3 23.9 23.4 23.1
Indiabulls Power 13 Buy 0.2 1.9 3.0
75.5 6.7 4.2 12.1 5.1 4.4 0.8 9.0 13.0
Jaiprakash Power 12 Under Review 2.8 3.6 4.1
4.5 3.5 3.0 8.8 5.1 4.5 13.0 15.6 15.6
JSW Energy 71 Neutral 7.8 5.8 5.6
9.0 12.2 12.6 5.8 6.4 6.3 18.3 12.1 10.8
NHPC 20 Neutral 2.1 2.4 2.5
9.3 8.0 7.9 7.8 7.3 7.0 8.1 8.4 8.2
NTPC 139 Buy 10.3 12.2 14.5
13.5 11.4 9.6 10.7 9.4 8.0 9.6 10.8 12.0
Power Grid Corp. 135 Buy 10.0 11.9 14.0
13.6 11.4 9.6 10.6 9.5 8.6 14.4 15.6 16.6
PTC India 85 Buy 9.5 13.3 15.0
9.0 6.4 5.7 8.7 4.4 3.3 7.0 10.4 10.9
Reliance Infra. 585 Buy 53.6 61.8 63.2
10.9 9.5 9.3 4.7 3.6 3.4 6.7 7.3 7.0
Tata Power 83 Neutral 5.6 6.8 8.0
14.9 12.2 10.4 11.3 9.0 8.2 7.9 8.5 8.5
Sector Aggregate
12.7 11.1 9.8 9.5 8.0 7.1 14.2 15.0 15.7
Source: Company, MOSL
October 2014 275

3. October 2014 276
September 2014 Results Preview | Sector: Utilities
Jul/Aug 2014 generation growth up due to economic recovery
Source: CEA
Monthly generation appears flattish
Source: CEA
Power demand growth sees upward trend YoY
Source: CEA
Base deficit remains at 4% in Jul/Aug 2014 period
Source: CEA
Peak deficit too trends lower, though shot up in Aug
Source: CEA
ST prices on upward trajectory since past four quarters
Source: IEX
RB Index* prices decline QoQ (USD/t)
* 6000Kcal, FoB South Africa Source: Bloomberg
INR remains flat
Source: RBI
42
50
52
55
56
55
59
57
59
56
54
51
50
60
58
62
64
56
64
62
66
57
58
53
61
60
62
67
66
73
68
70
71
69
69
65
61
71
74
76
76
78
78
75
74
72
67
61
62
71
71
73
74
71
72
70
72
65
61
56
65
62
65
69
70
69
66
69
68
68
65
60
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Coal Generation (BUs) PLF (%)
73
72
70
74
71
73
73
71
77
75
79
76
75
73
72
78
73
76
78
68
80
77
84
76
80
78
82
79
77
82
79
87
84
87
89
88
89
89
1113
0
19
6
1
12
-6
8
0
13
3 4 5
-2
10
0
4
10
-11
7
-2
10
1
8 9
5
8
1
5
15
9 8
4
18
1113
9
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
All India Generation (BUs) Gr (YoY, %)
79
84
85
86
83
80
84
79
85
85
73
86
83
91
83
87
84
83
80
77
83
84
78
85
7.4%
89
91
94
95
95
0.1%
13.8%
8.9%
12.9%
April May June July Aug Sept Oct Nov Dec Jan Feb Mar
FY13 FY14 FY15 Gr (%)
5
4.4
3.8 3.7 3.6
4.3
2
8
11
14
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
YTD FY15 FY12 FY13 FY14
5
4.9
4.1
5.1
3.5
8
6.0
2
11
14
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
YTDFY15 FY12 FY13 FY14
5.3
3.1
2.3
3.6
3.1
2.9
4.6
3.4
3.1
3.5
3.5
3.2
2.7
2.5
2.9
3.1
3.6
4.0
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
91
88
104
121
121
117
107
105
96
88
86
85
81
73
83
79
75
71
50
-40%
70
-15%
90
10%
110
35%
130
60%
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
Avg RB Index (USD/ton) YoY QoQ
46.0
55 55 54 5457
46 46 45 45 44
51.0
46
56.0
51 50
-2%
63 62 62 60 60
36.0
-10%
6%
14%
22%
41.0
61.0
66.0
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
QoQ (%) YoY (%) INR/USD

4. September 2014 Results Preview | Sector: Utilities
Generation, PLF for projects
Capacity Aug-14 Aug-13 YTDFY15 YTDFY14
(MW)* Generation PLF (%) Generation PLF (%) Generation PLF (%) Generation PLF (%)
Adani Power
- Mundra 4,620 2,203.3 64.1 2,118.0 61.6 13,565.3 80.0 11,683.3 68.9
- Tirora 2,640 1,386.7 70.6 2.5 0.0 6,537.1 67.4 2,980.0 47.1
GVK
- JP 1 & 2 455 0.0 0.0 74.8 22.5 190.1 28.6 399.4 60.1
- Gautami 464 - 0.0 0.0 0.0 0.0 0.0 0.0 0.0
GMR
- Barge Mounted 1,270 336.3 43.1 0.0 0.0 1,611.7 193.7 137.0 42.6
- Chennai 200 43.0 29.5 52.3 35.8 359.9 123.3 316.8 108.5
- Vemagiri 370 0.0 0.0 0.0 0.0 0.0 0.0 177.5 32.9
JPL
- Chattisgarh 1,000 673.6 90.5 657.5 88.4 3,521.3 95.9 3,592.4 97.8
Rel Infra
- Dahanu 500 369.4 99.3 357.3 96.0 1,854.8 101.0 1,771.9 96.5
- Samalkot (AP) 220 0.0 0.0 39.4 24.5 68.6 21.4 213.6 66.5
- Goa 48 0.0 0.0 21.7 61.9 12.6 18.0 105.7 150.8
- Kochi 174 0.0 0.0 0.0 0.0 116.5 45.9 46.9 18.5
Rel Power
- Rosa 1,200 661.8 74.1 707.7 79.3 3,978.8 90.3 3,364.1 76.3
- Sasan 2,640 1,545.2 77.9 0.0 0.0 6,462.8 77.9 0.0 0.0
Tata Power
- Trombay 1,580 353.7 34.0 817.2 46.2 2,674.2 39.9 3,378.4 55.7
- TISCO (Jamshedpur) 441 228.8 85.4 184.5 68.9 1,158.9 87.7 1,028.6 77.8
- Mundra UMPP 4,000 1,809.6 60.8 1,661.1 55.8 10,382.2 70.7 9,718.5 66.2
- Maithon 1,050 573.3 73.4 298.8 38.3 3,033.7 78.7 2,391.3 62.0
Torrent Power
- Existing 500 283.2 95.2 177.7 59.7 1,373.5 93.5 1,008.1 68.6
- Sugen 1,148 262.2 31.3 210.0 25.1 1,102.5 65.8 971.7 58.0
JSW Energy
- Rajwest 1,080 582.4 72.5 325.0 40.4 3,136.2 79.1 2,358.7 59.5
- Karnataka/Ratnagiri 2,060 552.1 86.3 1,232.7 80.4 2,954.4 93.6 2,885.3 91.4
CESC 1,285 817.0 85.5 811.7 84.9 4,066.9 86.2 4,049.3 85.8
Lanco Infratech
- Kondapali 716 26.3 5.0 108.6 20.8 452.4 43.3 651.4 62.3
- Amarkantak 600 128.8 28.9 159.6 35.8 965.3 43.8 898.3 40.8
- UPCL 1,200 458.4 51.3 226.3 25.3 2,629.1 59.7 2,689.1 61.0
- Anpara 1,200 676.0 75.7 503.4 56.4 3,521.9 79.9 2,553.2 57.9
KSK
- Wardha 1,740 470.9 55.5 285.6 58.1 1,591.2 38.0 1,256.7 63.4
Sterlite
- Jharsuguda 2,400 497.5 27.9 487.7 27.3 3,517.8 39.9 3,753.2 42.6
Source: CEA, *Monitored capacity by CEA
October 2014 277

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