We retain our neutral rating on Reliance Power (RPower) and the target price of R67 per share. Our target price is an aggregate of the milestone risk-adjusted FCFe-based value (based on a 15.5% cost of equity) of RPower's 25.4GW feasible generation capacity at R60 per share and FY15f consolidated cash on hand of R6 per share. At CMP, the stock trades at 1.3x P/B (BPS = R77 per share) and 25.7x P/E (EPS = R3.8) on our FY16F forecasts.
At R630 crore, RPower's consolidated ebitda came in 8% and 5% above our and consensus forecasts. The ebitda beat is on the back of ~2% higher revenues (versus our forecast) and ~20% q-oq drop in employee cost q-o-q (~24% below our estimates). At R240 crore, consolidated PAT came in 12% and 17% below our and consensus forecasts. Earnings miss at the bottom line stems from ~7% higher depreciation versus our forecasts (~R7.3 crore higher on the back of new Companies Act); ~23% higher interest cost versus our forecasts, and ~30% lower other income, likely on the back of lower treasury gains. We await clarity from management on these line items. We expect a neutral-to-negative reaction on the stock as a first cut ebitda beat is a positive, but PAT miss is fairly substantial. As earnings call is likely to be scheduled on Monday morning, we think managements commentary on project timeline and clarity on key line items and project-specific profitability will be more important.