Power Grid Corporation of India - 3QFY2016 Result Update - Angel Broking

For 3QFY2016, Power Grid Corporation of India (PWGR) reported a strong 23% yoy increase in transmission revenues to Rs. 5,143cr (5.5% ahead of our estimate of Rs. 4,925cr), on account of higher than expected capitalisation. Capitalisation for the quarter stood at Rs. 17,207cr, led by the commissioning of the Biswanath Chariyali - Agra HVDC transmission line. Even on exclusion of this line, total capitalisation stood at ~Rs. 9,000cr, well ahead of our expectation of Rs. 5,126cr. Capex incurred during the quarter, at Rs. 5,368cr, was also ahead of our estimate of Rs. 4,882cr. We raise our FY2016 capitalisation estimate to ~Rs. 32,850cr, as against ~Rs. 22,000cr earlier.

Increased operating efficiency and higher capitalisation helped the company in improving its EBITDA margin by 213bp yoy to 88.7%. The EBITDA for the quarter came in at Rs. 4,797cr as against our estimate of Rs. 4,482cr. The Management maintained its capex guidance of Rs. 22,500cr and Rs. 22,550cr for FY2016 and FY2017, respectively.

Outlook and valuation

We raise our estimates marginally to factor in the higher-than-expected capitalisation in 3QFY2016. We expect PWGR to report a revenue CAGR of ~17% (vs 16% earlier) and the EBITDA to grow at a CAGR of 19% (vs 16% earlier) over FY2015-17E. At the current market price of Rs. 148, the stock trades at a P/BV of 1.8x and 1.6x its FY2016E and FY2017E BV of Rs. 82 and Rs. 92, respectively. We retain our target price of Rs. 165 on the stock, based on ~1.8x FY2017E P/BV, implying a 12% upside from the current levels and have an Accumulate rating on the stock.

Shares of POWER GRID CORPORATION OF INDIA LTD. was last trading in BSE at Rs.145.3 as compared to the previous close of Rs. 146.85. The total number of shares traded during the day was 79881 in over 1288 trades.

The stock hit an intraday high of Rs. 147.55 and intraday low of 144.5. The net turnover during the day was Rs. 11644798.

Source : Equity Bulls

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