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
Source: Angelbroking
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