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Power Grid's 3Q results were in line with our expectations. Asset capitalisation remained steady
with Rs68bn capitalised ytd. We expect project execution and asset capitalisation, both key to
earnings, to pick up over the next couple of years. We like the stock as a defensive in the
transmission space. Maintain Buy.
Results in line with estimates
Power Grid reported 3Q11 revenues of Rs20.5bn (up 34.5% yoy), in line with our estimate.
Revenue from the core transmission sector came in at Rs20.1bn (up 28% yoy). EBITDA was
reported at Rs17.3bn (up 38.6% yoy), PBT at Rs8.4bn (up 55.6% yoy), while adjusted PAT was
Rs5.9bn (up 21.2% yoy), in line with our estimate.
Asset capitalisation remains key to earnings growth
The company saw a 15% qoq jump in capital employed during 3Q11 in the transmission
segment, which we believe is quite positive and indicates a possible pick-up in ongoing capex.
The company in its 3Q11 analyst meeting stated that asset capitalisation reached Rs68bn at
9M11, compared with Rs50bn at the end of the previous quarter. We expect capex to pick up as
the end of the 11th five-year plan approaches. Timely project execution and asset capitalisation
remain key to future earnings growth. Overall, we expect capex of Rs257bn and asset
capitalisation of almost Rs190bn in FY11-12, split Rs88bn in FY11 and Rs100bn in FY12. The
company’s regulated model means the corresponding asset capitalisation should result in a
CAGR of around 15% in revenue and profit during FY10-13F.
Defensive play on transmission infrastructure; maintain Buy, TP trimmed to Rs112
The company’s defensive characteristics awarded by its regulated model make it a relatively safe
play on transmission spending in the country. We believe the long-term prospects for the
company are promising, due to its monopoly-like position in the Indian transmission industry and
given the government’s transmission capex in the upcoming five-year plan. We marginally revise
our estimates for FY11, taking into consideration equity dilution post FPO changes. We also
increase our WACC in our DCF to account for a higher risk free rate and maintain our Buy rating
with a revised TP of Rs112. The stock trades at 2x our FY11F book value.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Power Grid's 3Q results were in line with our expectations. Asset capitalisation remained steady
with Rs68bn capitalised ytd. We expect project execution and asset capitalisation, both key to
earnings, to pick up over the next couple of years. We like the stock as a defensive in the
transmission space. Maintain Buy.
Results in line with estimates
Power Grid reported 3Q11 revenues of Rs20.5bn (up 34.5% yoy), in line with our estimate.
Revenue from the core transmission sector came in at Rs20.1bn (up 28% yoy). EBITDA was
reported at Rs17.3bn (up 38.6% yoy), PBT at Rs8.4bn (up 55.6% yoy), while adjusted PAT was
Rs5.9bn (up 21.2% yoy), in line with our estimate.
Asset capitalisation remains key to earnings growth
The company saw a 15% qoq jump in capital employed during 3Q11 in the transmission
segment, which we believe is quite positive and indicates a possible pick-up in ongoing capex.
The company in its 3Q11 analyst meeting stated that asset capitalisation reached Rs68bn at
9M11, compared with Rs50bn at the end of the previous quarter. We expect capex to pick up as
the end of the 11th five-year plan approaches. Timely project execution and asset capitalisation
remain key to future earnings growth. Overall, we expect capex of Rs257bn and asset
capitalisation of almost Rs190bn in FY11-12, split Rs88bn in FY11 and Rs100bn in FY12. The
company’s regulated model means the corresponding asset capitalisation should result in a
CAGR of around 15% in revenue and profit during FY10-13F.
Defensive play on transmission infrastructure; maintain Buy, TP trimmed to Rs112
The company’s defensive characteristics awarded by its regulated model make it a relatively safe
play on transmission spending in the country. We believe the long-term prospects for the
company are promising, due to its monopoly-like position in the Indian transmission industry and
given the government’s transmission capex in the upcoming five-year plan. We marginally revise
our estimates for FY11, taking into consideration equity dilution post FPO changes. We also
increase our WACC in our DCF to account for a higher risk free rate and maintain our Buy rating
with a revised TP of Rs112. The stock trades at 2x our FY11F book value.
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