Views on Power Grid Corporation (PGCIL) 3QFY2016 Result: Angel Broking

Views of Mr. Rahul Dholam (Sr. Research Analyst- Metals & Mining, Angel Broking) on Power Grid Corporation (PGCIL) 3QFY2016 Results:

Power Grid Corp 3QFY2016 results ahead of estimates

"Power Grid Corporation (PGCIL) 3QFY2016 total revenues increased 24% YoY to INR 5,407 cr, 5.5% ahead of our estimate of INR 5,125 cr. Transmission revenues came in 4.4% ahead of our estimate at INR 5,143 cr, increasing a healthy 23% YoY (vs. our estimate of 18%). Consultancy revenues came in line with our expectations at INR 114 cr as against our estimate of INR 112 cr. Telecom revenues jumped 49% YoY to INR 103 cr, well ahead of our expectations of INR 86 cr. Other operating revenues also came in at INR 47 cr as against our estimate of INR 1.4 cr. On the expenses front transmission expenses also came in lower than expected at 7.1% of transmission revenue (vs our expectations of 8%), while employee expenses were in line with estimates. EBITDA jumped 27% to INR 4,797 cr, 7% ahead of expectations, led by the higher revenue and lower than expected transmission expenses. EBITDA margin came in 126bp ahead of expectations and increased 213bp on a YoY basis. We expected a capitalisation of INR 5,126 cr this quarter. However, we believe the capitalisation figure would be higher at ~INR 5300-5500 cr. We await the capitalisation and capex details from the company. Depreciation and interest costs were ahead of expectations in line with our expectations of increased capitalisation. The company reported a net profit came of INR 1,613 cr 7.6% ahead of our estimate of INR 1,500 cr.

We like PGCIL for the high quality earnings and growth offered by the regulated equity model, huge investments that are required in the transmission sector and the execution track record of the company. We expect PGCIL to report a revenue and EBITDA CAGR of ~16% over FY2015-17E led by the strong capex plans and capitalisation rate. We expect the bottom-line to grow at a CAGR of 17% over the same period. At the current market price, the stock trades at a P/BV of 1.7x and 1.5x its FY2016E and FY2017E BV of INR 82 and INR 93, respectively. We remain positive on Power Grid and reiterate our BUY recommendation on the stock."

Shares of POWER GRID CORPORATION OF INDIA LTD. was last trading in BSE at Rs.147.6 as compared to the previous close of Rs. 143.75. The total number of shares traded during the day was 300688 in over 4516 trades.

The stock hit an intraday high of Rs. 148.2 and intraday low of 144.1. The net turnover during the day was Rs. 44043134.

Source : Equity Bulls

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