PTC India Ltd - Q2FY15 Update - CMP Rs.98, Rating changed to Hold with revised Target of Rs.102 - Sushil Finance

PTC India Ltd. (PTC) has reported decent set of numbers for the quarter ended Sept'14. We attended the analyst meet of the company and following are the key highlights of the results.

Key Highlights of Q2FY15 & H1FY15 results

- Healthy operating performance in Q2 was mainly attributed to strong volume growth & better trading margins. Volumes grew by ~18% YoY to 12.7 BU's mainly on back of strong growth in long-term volumes (incl. CB & Tolling) which grew by ~27% YoY to 6 BU's. Considering H1FY15 volumes (up ~20% YoY to ~23 BU's), we expect actual volumes in FY15E to be ~41 BU's.

- Increasing volumes, better trading margins (~Rs.0.044 vs 0.039/unit YoY) coupled with higher surcharge income has resulted in healthy operating profit growth of ~21% YoY to Rs.824 mn while margins stood at 2.0%. Trading margins are likely to improve gradually going forward with changing volume mix in favor of long-term volumes which management expects to move to ~50%+ of total trading volumes by 2016-17 from ~35% in FY14. Tolling margins for the quarter stood at ~Rs.0.20/unit.

- Better operational parameters along with higher other income (~2x YoY) & surcharge (Rs.190 mn vs Rs.132 mn) led to strong growth in net profits which grew by ~56% YoY to Rs.963 mn. The Company has received dividend of Rs.330 mn vs Rs.135 mn in Q2FY14 from its subsidiary PFS resulting in higher other income. Net Profit for H1FY15 grew by 53% YoY to Rs.1400 mn.

- Mgmt expects incremental long-term capacity of ~8 GW (operational ~3 GW) to come on-stream by FY17 (~5 GW by FY16) which would improve LT volume share (high margin) in volume mix to ~50% from current 35%. PPAs on LT basis are in place for ~11 GW while PSAs stands at ~7 GW. Teestha Hydro project is likely to get commissioned in CY15.

- The retail (Direct to Business) segment has been doing extremely well (~30% YoY growth) with volume contribution of ~10%. Management foresees huge opportunity in this segment & expects the volume to double in next few years.

- TNEB Update - Outstanding from TNEB still stands at Rs.2.5 bn which it expects to receive by FY15 end. However it received ~Rs.190 mn towards surcharge from TNEB in this quarter.

OUTLOOK & VALUATION

Improving economic scenario, higher government initiatives towards power segment coupled with healthy pipeline of long-term PPA's provide strong volume growth visibility. Better margins on back of changing volume mix along with strong growth outlook for its subsidiary (PFS) augers well for the Company going forward. Repayment of dues from TNEB (Rs.2.5 bn) by FY15 end is likely to further strengthen the balance sheet. Hence, considering the sound business model & long-term growth prospects of the Company, we maintain our positive view on the stock & recommend 'Hold' with a revised price target of Rs.102 based on the SOTP methodology.

Shares of PTC INDIA LTD. was last trading in BSE at Rs.98.6 as compared to the previous close of Rs. 95.45. The total number of shares traded during the day was 326422 in over 3940 trades.

The stock hit an intraday high of Rs. 99 and intraday low of 93.6. The net turnover during the day was Rs. 31630852.

Source : Equity Bulls

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