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LANCO INFRATECH
Plant shutdown and lower EPC margins hit earnings
Plant shutdown and lower EPC margins dent earnings
• Lanco Infratech (Lanco) reported PAT of INR 704 mn against our estimate of
INR 2,467 mn in Q2FY11. The reported PAT included forex gain of INR 299
mn and hence adjusted PAT would be INR 406 mn.
• Power earnings were subdued since the entire merchant capacity (666 MW)
had lower generation in the quarter due to maintenance shutdown at
Amarkantak I (300 MW) and partial operations of Kondapalli II 366 MW
which was commissioned during the quarter. Moreover, the company has
sold sizable power on exchanges in the INR 2.8-3.6/kWh range, bringing
down weighted average realisations to INR 4.03/kWh for the quarter.
• EPC margins were hit due to postponement of revenue booking which is
done on the basis of milestones achieved in project execution. Since most
execution milestones of the Udipi project were concluded in Q3FY11, the
revenue and profit booking will accordingly move forward to the third
quarter, which is likely to post higher numbers. Although margins are
volatile Q-o-Q, they are expected to be stable at 15-16% on annual basis.
