Power Grid (Q3 FY13)

India Infoline News Service | Mumbai |

Reported PAT was up 39.5% to Rs11.3bn; Adjusted for wage adjustments of Rs1bn, PAT grew by 26.8% yoy to Rs10.3bn

CMP Rs110, Target Rs142, Upside 29.1% 
  • Power Grid reported better than expected Revenue of Rs33.7bn registering 36.3% yoy growth

  • Reported PAT was up 39.5% to Rs11.3bn; Adjusted for wage adjustments of Rs1bn, PAT grew by 26.8% yoy to Rs10.3bn

  • The company capitalized projects worth Rs25.8bn; capitalization was slightly below our estimate due to unfavorable weather condition

  • Management optimistic about the higher capitalization and also maintains its target of investing Rs1,000bn in XIIth plan

  • We maintain our BUY rating with 9-month target price of Rs142

Result table (Standalone)
(Rs mn) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Revenues 33,617 24,666 36.3 28,882 16.4
Employee exp (2,244) (1,998) 12.4 (2,237) 0.4
Trans,
Admin and Other Exp
(2,142) (1,781) 20.3 (2,000) 7.1
EBITDA 29,231 20,888 39.9 24,646 18.6
OPM (%) 87.0 84.7 227 bps 85.3 162 bps
Dep and amort (8,654) (6,792) 27.4 (7,565) 14.4
Operating profit 20,577 14,095 46.0 17,081 20.5
Other Income 1,286 1,096 17.3 920 39.7
Finance Cost (6,848) (4,595) 49.0 (6,461) 6.0
PBT 15,014 10,596 41.7 11,540 30.1
Prior Exp (6) (31) - (4) -
Tax (3,717) (2,472) 50.4 (2,836) 31.1
PAT 11,291 8,092 39.5 8,701 29.8
Effe tax rate (%) 24.8 23.3 143 bps 24.6 19 bps
Pre Excp PAT 10,297 8,123 26.8 9,065 13.6
Pre Excp PAT margin (%) 30.6 32.9 (230) bps 31.4 (75) bps
EPS (Rs. Annualised) 8.9 7.0 26.8 7.8 13.6
Source: Company, India Infoline Research

Power grid reported another quarter of sturdy growth; ahead of our expectations

Power Grid reported revenues of Rs33.7bn registering 36% yoy and 16.4% qoq growth. PAT increased by 39.5% yoy and 29.8% qoq. The company accounted for ~Rs1bn of gain on account of salary adjustments in this quarter. Even after adjusting for Rs1bn, PAT was up 26.8% yoy and 13.6% qoq.


Capitalization of Rs26bn was slightly below our estimate

Power Grid continued its growth momentum in capitalization. The company capitalized projects worth Rs26bn in this quarter and incurred capex at Rs55 bn during Q3 FY13. For the company as on 9MFY13, capitalization stands at Rs93bn with a capex of Rs126bn. The capitalization was below our estimate due to seasonal factors (work was halted for 2-3 weeks at north region due to heavy snow fall). Normally the fourth quarter is good for Power Grid, hence we expect capitalisation worth Rs140bn in FY13. The company has planned Rs 1,000bn capital expenditure in the next five years. The company targets for 90% capitalization in each year in XIIth Plan.


Transmission Revenue grew by 38.8% yoy and 9.3% qoq

Revenues from its transmission segment increased 38.8% yoy to Rs32.3bn. Consultancy business revenues declined to Rs657mn from Rs734mn while telecom revenues moved up by 8.6% yoy to Rs582mn. Management portrayed better outlook for Telecom business but, consultancy business lackluster. The company expects to inch up in the consultancy business with few international projects.


Outlook & Valuation

Power Grid is a monopoly play in the regulated transmission business in India and its one of the better managed PSUs. The company is in a regulated business which assures minimum 15.5% ROE; guarantees reasonable profitability along with steady returns. PWG plans Rs1,000bn of capex during the XIIth Five Year Plan (FY13-17). For power grid the asset base increases with every tick.  Additionally, PWG also provides chance to participate in power sector reforms as the company is the indirect beneficiary. We also expect gradually capitalization will catch up to the same extent of capex to avoid cash flow mismatch which will further reduce the concerns over equity dilution. We believe EPS CAGR of 20% over FY12-15E with an average RoE of 15.5% makes it one of the safe and attractive bet in troubled utility sector. We maintain our BUY rating with 9-month target price of Rs142



Financial Summary
Y/e 31 Mar (Rs m) FY12 FY13E FY14E FY15E
Revenues 100,353 127,903 148,336 172,891
yoy growth (%) 19.6 27.5 16.0 16.6
Operating profit 83,824 108,068 125,526 147,800
OPM (%) 83.5 84.5 84.6 85.5
Reported PAT 32,550 42,730 49,837 57,058
yoy growth (%) 20.7 31.3 16.6 14.5
         
EPS (Rs) 7.0 9.2 10.8 12.3
P/E (x) 15.6 11.9 10.2 8.9
Price/Book (x) 2.2 1.9 1.7 1.5
EV/EBITDA (x) 12.0 10.5 9.9 9.1
Debt/Equity (x)
BSE 203.00 [0.95] ([0.47]%)
NSE 202.90 [1.40] ([0.69]%)

***Note: This is a NSE Chart

 

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