Earnings Update - Power Grid (PWGR IN) - Strong capitalization to drive the growth - CSEC Research

Strong capitalization to drive the growth

- In 4QFY17, Power Grid reported revenue of INR 67bn, up 17% YoY, Transmission business (Which accounts 91% of revenue) increased by 18% YoY to INR 64.3bn on the back of strong capitalization. Telecom business increased by 27% YoY to INR 1.3bn, while consultancy business de-grew by 12% YoY to INR 1.4bn due to closure of orders.

- Capitalization stood at INR 150bn (including TBCB (Tariff-based competitive bidding)) in 4QFY17 Vs INR 48bn in 4QFY16 due to commissioning of several large lines including Phase-I of Champa-Kurukshetra, Wardha-Nizamabad and Angul-Srikakulum. Capex for the quarter stood at INR 84bn.

- In FY17, the company achieved a capitalization of INR 320bn (including TBCB), and a highest-ever capex of INR 244bn in a single year.

Valuation: PGCIL's strong execution capabilities coupled with its consistent investment led asset growth and sustained profitability paint a positive picture for the company's outlook. Moreover, the government's target of 100% rural electrification by May 2018 augers well for the company. Currently, the stock is trading at 1.7xFY19E consensus P/BV. We assign a multiple of 1.9x FY19E P/BV and rate the stock an OUTPERFORMER with a Target Price of INR 225.

Risks: Inability to realize revenues relating to big-ticket assets; any further disinvestment by the Government of India.

Shares of POWER GRID CORPORATION OF INDIA LTD. was last trading in BSE at Rs.206.15 as compared to the previous close of Rs. 207.75. The total number of shares traded during the day was 78730 in over 964 trades.

The stock hit an intraday high of Rs. 208.3 and intraday low of 205.35. The net turnover during the day was Rs. 16222804.

Source : Equity Bulls

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