PTC India - Strong core performance - ICICI Securities

41.4% YoY increase in trading volumes in Q3FY21 (from 13.2BUs to 18.6BUs) and 17.1% increase in trading margins YoY (from 3.77p/kWh to 4.41p/kWh) resulted in 93.5% YoY increase in PTC India's (PTC) PAT to Rs1.1bn. The increase in volumes is primarily attributed to 102% jump in short term volumes to 10,551MUs, while medium and long term volumes increased by 2% to 8,046MUs. While the overall working capital deployment increased slightly from FY20-end levels to Rs26bn at Q3FY21-end, rebate/surcharge during the quarter was up 23.2%/50.8% YoY at Rs307mn/Rs651mn respectively. We maintain our BUY rating on the stock with a target price of Rs120. The stock can potentially rerate once the divestment/dilution of non-core assets' stake is completed.

- Higher short-term volumes push overall volumes: 41% increase in overall volumes was driven by 102% increase in short term volumes. This took the share of short term volumes in the overall mix to 57%. Medium and long term volumes increased by 2% to 8,046MUs. Thus, trading income increased 69.5% to Rs820mn. Rebate/surcharge was up 23.2%/50.8% YoY at Rs307mn/Rs651mn respectively. This resulted in 93.5% YoY increase in PAT to Rs1.1bn. In 9MFY21, total volumes were 17% higher at 54.3BUs while margins were up 13.9% to 4.47p/kW. Thus, PTC's PAT was higher by 35.5% YoY to Rs3.5bn.

- Receivables under control; no working capital concerns: As at Dec'20-end, working capital deployment stood at Rs25bn (Rs24bn at FY20-end). With further disbursals from PFC/REC scheme, coupled with receivables management, the company expects working capital deployment to reduce going forward. Debtors have declined to Rs74.6bn as at Dec'21-end vs Rs80.5bn at Sep'20-end while creditors declined to Rs49.5bn from Rs64.6bn.

- Medium and long term volumes may start witnessing higher traction: As power demand has increased substantially in the past few months, with peak demand reaching 189GW, prices on exchanges, especially during peak hours, have firmed up. Thus, bilateral volumes, which shifted to exchanges during H1FY21, may start increasing. Further, if the high power demand sustains, which looks likely, buyers may again start to focus on signing medium to long term PPAs. PTC expects to open the medium term (3-year contract) 2,500MW tender for bids in the next few months.

- Maintain BUY with target price of Rs120/share: We maintain BUY on PTC India with a SoTP-based target price of Rs120/share. We believe the company's dilution of stake in its non-core holdings will result in value unlocking and lead to meaningful upward rerating of the stock price. Company had also announced a dividend policy in FY20, wherein it stated intent to pay out at least 50% of the annual profit. At CMP, the dividend yield is 10.4% on FY23E basis. The stock is currently trading at FY23E standalone P/BV of 0.5x.

Shares of PTC INDIA LTD. was last trading in BSE at Rs.69.2 as compared to the previous close of Rs. 69.45. The total number of shares traded during the day was 145168 in over 679 trades.

The stock hit an intraday high of Rs. 70.9 and intraday low of 68.3. The net turnover during the day was Rs. 10094623.

Source : Equity Bulls

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