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R-Power, R-Infra profits beat estimates, stocks surge

R-Power, R-Infra profits beat estimates, stocks surge
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First Published: Thu, Aug 11 2011. 11 54 PM IST
Updated: Thu, Aug 11 2011. 11 54 PM IST
Mumbai: The June-quarter results of Reliance Infrastructure Ltd (R-Infra) and Reliance Power Ltd (R-Power), both Reliance Group companies, outdid expectations and lifted the stocks on Thursday.
R-Power’s net profit at Rs 196 crore was nearly unchanged from a year ago, but most of it has come from core operations this time. Last year, its profit was almost entirely driven by income from investments.
Revenue soared 72% to Rs 689 crore, including Rs 542 crore from core operations.
Earnings before interest, taxes, depreciation and amortization (Ebitda)—a measure of operating profitability—from generating assets rose 245% to Rs 208 crore.
Most of R-Power’s operating revenue and profit was driven by its 600MW plant at Rosa in Uttar Pradesh, which operated at a load factor of 91% during the quarter.
A Bloomberg consensus of analysts’ estimates had pegged the profit at Rs 129.6 crore on a revenue of Rs 472.73 crore.
R-Power’s shares gained 0.44% on BSE on Thursday to close at Rs 91.30 a share. The bourse’s benchmark index, the Sensex, lost 0.42% to end at 17,059.40 points.
Jayarama Prasad Chalasani, chief executive of R-Power, said growth in the company’s financials from its core operations was an important indicator to shareholders of its future trajectory.
“As more and more projects come onstream, operational revenue will increase in coming quarters, but we will also end up spending more money to build them,” Chalasani said.
“This is the second quarter in a row that R-Power’s numbers have exceeded estimates,” said Ajay Parmar, head of research at Emkay Global Financial Services Ltd, a Mumbai-based brokerage. “We were expecting a margin of 26% but it came in at 34%.”
R-Infra’s net profit rose 8% to Rs 405 crore helped by a 38% jump in operating income to Rs 5,191.98 crore. Bloomberg’s consensus estimate was for a profit of Rs 373 crore on a revenue of Rs 4,346.6 crore.
R-Infra’s share price gained 2.56% on BSE to Rs 484.05.
Revenue from its electricity business declined 7.6% to Rs 3,039.96 crore. But this was offset by a four-fold jump in revenue in its engineering, procurement and construction (EPC) and contracts business to Rs 1,750 crore, and a nine-fold rise in its infrastructure segment to Rs 111.66 crore.
The quarterly financials were also aided by other operating income of Rs 289.54 crore. R-Infra had other operating income of Rs 3.40 crore in the same year-ago quarter.
The other income was due to a write-back of depreciation charges following changes in methodology and rates for calculating depreciation in the electricity business.
An analyst with a Mumbai-based brokerage said if R-Infra June-quarter numbers were adjusted for the write-back, “they don’t look that great”. He did not want to be named.
“Other income for the period has also fallen and the rate of taxation appears high. More clarity is needed from the management on these two issues,” he said.
Profits increased substantially at R-Infra’s three businesses. Ebit from its electricity business doubled to Rs 524.37 crore; grew 2.5 times to Rs 140.65 crore in the EPC and contracts business, and jumped eight-fold to Rs 40.15 crore in the infrastructure arm.
“One critical factor that was missing in our results so far was growth in revenue and profits from the EPC business and we have achieved that now,” said Lalit Jalan, chief executive of R-Infra.
The EPC business benefited from gaining momentum of power and infrastructure projects at group firms, Jalan said. These projects comprise 90% of R-Infra’s EPC order book.
Separately, R-Power said it will “pause” before starting work on the ultra mega power project it is building at Krishnapatnam in Andhra Pradesh till issues over the price of coal imports from Indonesia are resolved.
“The pricing of imported coal is a factor impacting the entire power sector in the country,” Chalasani said. “Since Krishnapatnam is yet to take off the ground, we are taking this opportunity to pause and wait till the issue is resolved.”
The Indonesian government has mandated that coal mined in the country should be sold at international market prices.
The new mandate has pushed up Indonesian coal cost, threatening the feasibility of Indian projects and imports from there.
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First Published: Thu, Aug 11 2011. 11 54 PM IST
More Topics: Company Results | Reliance | Stocks | Revenue | R Power |