Views on Power Grid Corp 2Q2016 Result: Angel Broking

Views of Mr. Rahul Dholam (Sr. Research Analyst- Metals & Mining, Angel Broking) on Power Grid Corp 2Q2016 Results:

Power Grid Corp 2Q2016 Results First cut: Profit in line with estimates.

Power Grid 2Q2016 total revenues increased 18% YoY to INR 4,918cr, 2.8% below our estimate of INR 5,062cr. Transmission revenues came in 3.5% below our estimate at INR 4,708cr, increasing 17% YoY (vs. our estimate of 21%). Consultancy revenues once again surprised positively at INR 99cr as against our estimate of INR 89cr. Telecom revenues too came ahead of expectations this quarter at INR 97cr vs. our estimate of INR 64cr. Transmission expenses as a percentage of transmission revenues was 30bp lower than estimate at 7.7%, while employee expenses was much lower than expected at INR 239cr as against our expectation of INR 304cr. This led to a 190bp YoY improvement in EBITDA margin at 87.8% during the quarter as against 85.9% in 2QFY2015 and our estimate of 86.3%. Net profit was marginally above our estimate led by higher other income at INR 1,448cr vs. our estimate of INR 1,440cr. We still await the capitalisation and capex details from the company.

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 ~17% over FY2015-17E led by the strong capex plans and capitalisation rate. We expect the bottom-line to grow at a CAGR of 18% over the same period. At the current market price, the stock trades at a P/BV of 1.6x and 1.4x its FY2016E and FY2017E BV of INR 82 and INR 92, 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.131.2 as compared to the previous close of Rs. 131.45. The total number of shares traded during the day was 269604 in over 2192 trades.

The stock hit an intraday high of Rs. 134 and intraday low of 130.55. The net turnover during the day was Rs. 35484010.

Source : Equity Bulls

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