TP reduced to $44 given lower tariffs, project delays; firm best placed to leverage RE story; ‘Buy’ maintained
Azure Power’s (Azure’s) Q1FY22 revenues rose 15% y-o-y and Ebitda rose 14% y-o-y to Rs 3.7 bn, 8% above expectations. 62-MW capability has been added in the quarter and plans to achieve 3 GW by finish FY22e from 2 GW finish FY21 is on monitor. Delays in the 4-GW SECI PPA and decrease tariff have led to a discount in our PT, other than greater module prices. However, we imagine Azure is finest positioned to profitably leverage India’s renewable power theme as ROE focus stays. BUY.
SECI indicators PSA for 800 MW of 12- GW tender: Azure gained 4 GW of 12-GW manufacturing linked tender, which was lengthy awaiting SEBs to come back on board for the upper tariff. Solar Energy Corp. of India (SECI) lastly signed Power Supply Agreement (PSA) with SEBs at Rs 2.54/ unit for 800 MW, implying 260-270 MW of Azure’s 4 GW needs to be arrange over 12-18 months. Azure lately gained 150 MW at SECI’s 1.2-GW public sale at Rs 2.34/unit. Mgmt reiterated that it’s affected person and might be selective in bidding to make sure it builds a worthwhile pipeline.
Refinancing results in 222 bps financial savings in curiosity prices: Azure efficiently accomplished a bond issuance on 14th August 2021 at a 3.575% coupon for 611-MW operational tasks. This is 27.5 bps decrease than any providing by an Indian renewable power participant in the worldwide markets. Including hedging, Azure has raised debt at 7.5-8%, which might additional cut back publish Omers (Canadian Pension Fund) buying a 19.4% stake.
Capacity to rise 3.5x, era 4.5x throughout FY21-27e: Azure’s share value has corrected sharply between delays in the SECI PPA, rising module prices and issues on capability development prospects. We imagine India’s photo voltaic pipeline needs to be in 10-15 GW vary yearly over the following 3-5 years.
We estimate Azure to develop at 21% Ebitda CAGR in FY21-27e with 13-15% long run ROE prospects based mostly on present pipeline. We imagine the present market value elements in solely Azure’s 3-GW portfolio and no upside on the 4-GW SECI bid or new project wins. We cut back our PT to $44 from $57 as we account for decrease tariffs and project delays. We haven’t any terminal development constructed in however have factored in incremental 15-GW commissioning between FY28e-35e.