Power Grid Corporation of India - Results beat estimates, lower commissioning may result in equity dilution... - Ventura

With the Indian power sector witnessing negative headwinds, PGCIL's current regulated assets with assured returns stands to be the best play in the sector. Further, strong capex guidance for the XIIth Plan with approved investments of 88.7% provides strong revenue visibility over the long term. However, lower commissioning and higher dividend (to the largest shareholder) may result in equity dilution over the next 2 years. At CMP of Rs 107, the stock is currently trading at a P/E multiple of 10.9x and 10.2x for FY14E & FY15E consensus earnings estimates. We recommend a Hold on the stock.

Key Takeaways

- Led by robust growth in the transmission business, Power Grid Corporation of India Ltd (PGCIL) posted 36.3% yoy increase in revenues to Rs. 3361.7 crore. EBITDA for Q3FY13 stood at Rs 2923.1 crore (+39.9% YoY) on the back of lower increase in total operating expenditure (+16.1% YoY). As a result, profits for the current quarter grew by 39.5% to Rs. 1129.1 crore.

- On the back of higher capitalisation, sales from Transmission segment in Q3FY13 grew by 38.4% yoy to Rs 3237.7 crore. However, revenues from the Consultancy division stood at Rs 65.8 crore (-10.4% yoy) for the current quarter.

- PGCIL capitalised projects worth Rs.2586 crore of transmission assets for Q3FY13. YTD capitalisation stands at Rs 9352 crore. The company maintains capitalisation target in FY13E to be ~ Rs 16000 crore (YTD capitalisation at Rs 10,550 crore).

- Capex for Q3FY13 stood at Rs 5500 crore. 9MFY13 capex stood at Rs 12713 crore. Overall capex target for FY13E is Rs 20,000 crore. The company added 1126 ckm of transmission line in Q3FY13. The present transmission line capacity at stands at 98367 ckms. In the transformation segment the company has added 2163 MVA in Q3FY13. In 9MFY13, the capacity has added 4330 ckms and addition in the transformation segment stood at 28783 MVA.

- In the XIIth Five year plan, the company has approved investment of Rs 88,700 crore and have awarded contracts for projects worth 78,000 crore. The company intends to spend Rs 100,000 crore on capex activities in the XIIth plan funded by Debt: Equity of 70:30.

Source : Equity Bulls

Keywords