Saturday, June 6, 2015

Result Update: Power Grid Corporation

Result Updates
Revenue and earnings growth in-line with estimate Power Grid Corporation of India (PGCIL) reported a healthy 19.6% yoy increase in transmission revenues at Rs4,426cr, marginally below our estimate of Rs4,487cr. Consultancy revenues from services increased 6% yoy to Rs157cr, well ahead of our estimate of Rs133cr. Telecom revenues too were ~15% ahead of our estimate at Rs79cr. The increase in consultancy and telecom income more than offset the lower than expected transmission revenues, resulting in total operating income of Rs4,703cr, 0.3% higher than our estimate of Rs4,689cr. EBITDA margin increased 140bp yoy to 86.3% led by higher income from consultancy and telecom. Net profit increased ~20% yoy to Rs1,412cr vs our estimate of Rs1,378cr. Capitalisation below expectations, capex guidance maintained 4QFY2015 capitalisation came in lower than expected at Rs4,986cr, vs our estimate of Rs6,383cr. This was largely on account of delay in the commissioning of certain projects, which would be capitalized in 1QFY2016. PGCIL incurred a capex of ~Rs22,456cr in FY2015 in line with its target of Rs22,500cr. 

The company has guided for ~Rs45,000cr capex (Rs22,500cr in FY2016 and Rs22,550cr in FY2017) over the next two years. The current capital work in progress (CWIP) stands at ~Rs56,576cr. With total outlay upwards of Rs1,00,000cr, capitalisation is expected to remain healthy, providing strong earnings visibility. Outlook and valuation Led by strong capex plans and a healthy capitalisation rate, we expect PGCIL to report a revenue and EBITDA CAGR of ~15%. At the current market price of Rs143, the stock trades at a P/B of 1.8x and 1.6x its FY2016E and FY2017E BV of Rs81.5 and Rs91.2, respectively. We remain positive on the stock with a target price of `170, based on ~1.85x FY2017E book value, implying an 18% upside from the current levels. Maintain Buy.

Source: Angelbroking 

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