Adani Transmission Q4FY23: posts 85% rise in consolidated, right time to buy Adani Transmission?

For the quarter ended March 2023, the numbers of Adani Transmission Ltd (ATL) were fairly impressive. The net profits on a stand alone basis were up 85% in the quarter on a yoy basis while the consolidated profits were up 69.6% yoy at ₹389 crore for the fourth quarter. The big driver of higher profits was the boost to the gross margins as the costs were static amidst rising sales revenues. Also, the company had the benefit of higher net deferral gains, which is a non-operation item and resulted in higher gains in the quarter.

Key highlights of the Adani Transmission Ltd (ATL) story for Q4FY23

Here are some of the major takeaways from the quarterly and full year FY23 numbers of Adani Transmission Ltd (ATL) reported on 29th May 2023.

1. For the quarter ended March 2023, Adani Transmission Ltd (ATL) reported 85% higher PAT and 12% higher cash profits at ₹3,411 crore.
    
2. The EBITDA of Adani Transmission Ltd (ATL) for FY23 full fiscal year grew 11% yoy at ₹6,101 crore, one of its best performances in recent times. Its business model includes the transmission business and the GTD business, which is predominantly Mumbai power supply business, which it acquired from the Anil Ambani group in 2018.
    
3. For the full fiscal year FY23, the total revenues were up 19% at ₹12,149 crore while the EBITEDA was up 15% at ₹5341 on consolidated basis. Net debt to EBITDA at the close of the year stands at 4X, and that still remains a concern as has been highlighted in recent times.
    
4. Let us look at the consolidated picture for Q4FY23. On a standalone basis, the consolidated PAT grew 85%at ₹440 crore on account of a one-time gain of ₹148 crore based on a regulatory order in the Transmission business.
    
5. Let us look at some of the operational issues pertaining to the company now. In the transmission business, the total system availability stood at 99.7%. During the year, Adani Transmission Ltd (ATL) added 1,704 CKM to operational network, with total current network standing at 19,779 CKM.
    
6. For the year, the company maintained supply reliability at 99.9% even as the energy demand grew 13.7% on yoy basis to 9,062 million units. On the positive side, the distribution losses were reduced to 5.93%, while the collection efficiency has actually gone up to above 100%.
    
7. For fourth quarter and for the full fiscal year, the consolidated revenue saw double-digit growth. This was aided by new transmission lines becoming operational and an uptick in energy consumption. For the fourth quarter (Q4FY23), the consolidated cash profit was up 28% yoy at ₹977 crore while full year cash profits for FY23 were up 12% at ₹3,411 crore.

Overall, it was an impressive performance by Adani Transmission Ltd (ATL) for the quarter and for the full year FY23. Let us now turn to the financial highlights of the quarter.

Financial story of Adani Transmission Ltd (ATL) for the quarter

Let us talk about the top line or the revenues first. For the fourth quarter of Q4FY23, Adani Transmission reported 12.9% spike in the net revenues for the March 2023 quarter on consolidated basis at ₹3,358 crore. However, the top line revenues were down -5.46% on sequential basis. For the March 2023 quarter, the first vertical of transmission revenues were up 30%. On the other hand, the revenues of the GTD business (generation, transmission, and distribution) business saw growth of 21.6% on yoy basis. The GTD business basically comprises the Mumbai power business that Adani acquired from the ADAG group in 2018. In terms of operating profit growth, while transmission business was good, the GTD business was outstanding. For instance, the transmission business operating profits were up 14% yoy while operating profits from the GTD business actually grew by a whopping 91.4% on yoy basis.

Key numbers of Adani Transmission Ltd (ATL)

The table below captures the gist of the performance of Adani Transmission Ltd (ATL) for the quarter to March 2023. This quarterly performance has also been compared on a yoy basis and on a sequential basis.

Data Source: BSE

The major takeaway in the numbers is that the profit growth has been largely driven by the enhanced gross profit performance of Adani Transmission Ltd (ATL) while the bottom line has seen the benefits of better gross margins plus higher power related net deferral revenues in the quarter.

How about operating and net margins of Adani Transmission Ltd (ATL)

There has been a sharp growth in Adani Transmission Ltd (ATL) numbers at an operating level and at a bottom line level. While operating profits for the quarter were up 40.3% at ₹1,153 crore, net profits grew 69.6% yoy to ₹389 crore. What triggered this big growth? The operating profits got an upward thrust from sharply higher gross margins in the quarter. That was largely due to static costs in spite of revenues growing at a healthy rate. The net profit got a big boost from sharply higher gains from net deferral changes. These contributed to a sharp spike in the profits of Adani Transmission on a yoy basis. Let us now also look at the impact on margins.

In the case of Adani Transmission Ltd (ATL), the operating margins improved yoy from 27.6% to 34.3% due to improved contribution margin from the core power operations. What about the net margins or PAT margins? Net margins also improved to 11.6% compared to 7.72% in year ago period; one of the best shows put up by a power company. But for a group that has faced a lot of flak for its high debt levels, the best consolation came from the solvency ratios. The company reported visible improvement in the interest coverage ratio (ICR) as well as the debt service coverage ratios (DSCR) for the quarter showing improved solvency.