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Research
PTC India - More 'POWER' to volumes - IDFC
Posted On : 2013-10-08 21:52:49( TIMEZONE : IST )
PTC India's (PTC) shift from tolling to trading arrangements has mitigated the risk to earnings from high cost of generation with imported coal and fixed payment to generators. Also, a large portfolio of power stations where PTC has power purchase agreements (PPAs) would commission in 1-2 years. This should drive 26% CAGR in PTC's trading volumes over FY13-15E, aided by supply commencing from disputed long-term PPAs with Karcham Wangtoo and Lanco Amarkantak. We expect 10% earnings (standalone) CAGR for PTC over FY13-15. At 9x FY15E earnings (standalone) and 0.6x BV, valuations appear attractive. Reiterate Outperformer with a 12-month revised price target of Rs58/ share.
Robust 26% CAGR in trading volumes over FY13-15E: With portfolio mix changing to longer-term PPAs (42% of total as of FY15), there is visibility on PTC's volumes. We estimate 27BU of incremental power available by FY15 and 38BU by FY16 with power capacity of ~9.8GW tied up as PPAs come onstream in next 24 months. Of the 9.8GW, PTC has long-term power sale arrangement (PSA) of ~3.2GW.
Improved earnings outlook with dues payment and investment monetization: Outlook on earnings from cash and working capital will improve with liquidation of dues of Rs2.6bn from Tamil Nadu and Rs5.3bn from Uttar Pradesh over next 2-3 quarters on finalization of the financial restructuring programme. Also, four power projects where PTC has equity investments are likely to be commissioned in next 12 months. Hence, monetization outlook on these investments improves considerably.
Attractive valuations; Outperformer: At 9x FY15E standalone earnings and 0.6x FY15 BV, we find the stock attractively valued in view of 26% CAGR in trading volumes, 10% CAGR in earnings and visibility on commissioning of power projects where PTC has investments. Slower-than-expected volume growth due to delays in commissioning of any of the upcoming power projects is a key downside risk to our numbers. Reiterate Outperformer with a revised price target of Rs58.
