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UBS Investment Research
Power Grid Corporation of India
3Q FY11: In line results
Revenues up 21% YoY in 3Q FY11
In 3Q FY11, Power Grid has reported revenues of Rs20.52bn, up 21% YoY and
EBITDA Rs17.27bn, up 22% YoY. On reported basis, PAT is Rs5.91bn, up 21%
YoY. Recurring PAT (after adjusting for certain prior period items) is Rs5.96bn.
The results are in-line with UBS-e and we maintain our full year FY11 estimates.
The fixed RoE based model with cost pass through remains robust, in our view.
Transmission segment reported strong revenues growth
Transmission segment which contributed 93% of 3Q revenues have grown at 24%
YoY (9M FY11 +20% YoY). However, the revenues for consultancy segment
have fallen and for telecom segment as well, the revenue growth was muted. For
9M, the revenue contribution from consultancy segment is Rs2bn (up 27% YoY),
from Short-term open access it is Rs1.6bn (up 107% YoY).
Very good defensive in a natural monopoly sector
We think Power Grid will be a key beneficiary of growth in the transmission
sector; it already has more than a 50% market share and we expect this to increase.
We believe Power Grid has significant advantages: 1) the low risk nature of its
business, with ROE of 15.5% plus incentives totalling 17-18%; 3) substantial
growth potential; and 3) as the central transmission utility, it has been assigned the
role of coordinator in the sector.
Valuation: Buy rating and price target of Rs135
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool, assuming 10.1% WACC.
3Q FY11: Recurring PAT up 22% YoY
In 3Q FY11, Power Grid has reported revenues of Rs20.5bn, up 21% YoY and
EBITDA of Rs17.3bn, up 22% YoY. On reported basis, PAT is Rs5.9bn, up
21% YoY. PAT after adjusting for prior period items is Rs6bn. The results are
largely in-line with our estimates and we maintain our full year FY11 estimates
for Power Grid.
Transmission segment which contributed 93% of 3Q revenues have grown at
24% YoY (9M FY11 +20% YoY). However, the revenues for consultancy
segment have fallen, and for telecom segment the revenue growth was muted.
The growth for short term access segment remained strong in Q3 at 18% YoY.
The revenue contribution from consultancy segment is Rs2bn (up 27% YoY),
from Short-term open access is Rs1.6bn (up 107% YoY) for 9M.
Power Grid Corporation of India
Power Grid Corporation of India (Power Grid) is the government-appointed
central power transmission utility of India. The company is one of the largest
transmission utilities in the world with more than a 50% market share in India.
Power Grid has diversified into telecom and established a telecom network of
more than 21,000km across the country. It also has a robust consultancy
business.
Statement of Risk
The key downside risks for the Power Grid are: 1) slower-than-expected
execution of projects; 2) availability of contractors/equipment; 3) competition;
4) lower-than-expected capex; 5) delay in generation projects; and 6) majority
government ownership and control.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Power Grid Corporation of India
3Q FY11: In line results
Revenues up 21% YoY in 3Q FY11
In 3Q FY11, Power Grid has reported revenues of Rs20.52bn, up 21% YoY and
EBITDA Rs17.27bn, up 22% YoY. On reported basis, PAT is Rs5.91bn, up 21%
YoY. Recurring PAT (after adjusting for certain prior period items) is Rs5.96bn.
The results are in-line with UBS-e and we maintain our full year FY11 estimates.
The fixed RoE based model with cost pass through remains robust, in our view.
Transmission segment reported strong revenues growth
Transmission segment which contributed 93% of 3Q revenues have grown at 24%
YoY (9M FY11 +20% YoY). However, the revenues for consultancy segment
have fallen and for telecom segment as well, the revenue growth was muted. For
9M, the revenue contribution from consultancy segment is Rs2bn (up 27% YoY),
from Short-term open access it is Rs1.6bn (up 107% YoY).
Very good defensive in a natural monopoly sector
We think Power Grid will be a key beneficiary of growth in the transmission
sector; it already has more than a 50% market share and we expect this to increase.
We believe Power Grid has significant advantages: 1) the low risk nature of its
business, with ROE of 15.5% plus incentives totalling 17-18%; 3) substantial
growth potential; and 3) as the central transmission utility, it has been assigned the
role of coordinator in the sector.
Valuation: Buy rating and price target of Rs135
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool, assuming 10.1% WACC.
3Q FY11: Recurring PAT up 22% YoY
In 3Q FY11, Power Grid has reported revenues of Rs20.5bn, up 21% YoY and
EBITDA of Rs17.3bn, up 22% YoY. On reported basis, PAT is Rs5.9bn, up
21% YoY. PAT after adjusting for prior period items is Rs6bn. The results are
largely in-line with our estimates and we maintain our full year FY11 estimates
for Power Grid.
Transmission segment which contributed 93% of 3Q revenues have grown at
24% YoY (9M FY11 +20% YoY). However, the revenues for consultancy
segment have fallen, and for telecom segment the revenue growth was muted.
The growth for short term access segment remained strong in Q3 at 18% YoY.
The revenue contribution from consultancy segment is Rs2bn (up 27% YoY),
from Short-term open access is Rs1.6bn (up 107% YoY) for 9M.
Power Grid Corporation of India
Power Grid Corporation of India (Power Grid) is the government-appointed
central power transmission utility of India. The company is one of the largest
transmission utilities in the world with more than a 50% market share in India.
Power Grid has diversified into telecom and established a telecom network of
more than 21,000km across the country. It also has a robust consultancy
business.
Statement of Risk
The key downside risks for the Power Grid are: 1) slower-than-expected
execution of projects; 2) availability of contractors/equipment; 3) competition;
4) lower-than-expected capex; 5) delay in generation projects; and 6) majority
government ownership and control.
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