India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Meaningful acceleration in capitalization to drive core earnings
Contribution from other segments increasing, reported RoE to improve
FY12/13 are inflexion points in Power Grid's (PGCIL) growth trajectory, with capitalization
of Rs225b (v/s Rs110b over FY10-11) and projects under construction of Rs839b as at
March 2011 (up from Rs400b as at March 2009). Over FY09-11 PGCIL’s capex was Rs323b
and its targeted spending over FY12-13 is Rs342b. Nine high speed transmission corridors
(HSTC) to route 42GW capacity, being set up by IPPs, will accelerate spending. This, in our
view, will drive execution and lead to higher earnings growth. PGCIL has one of the best
business models among utilities and is relatively insulated from concerns facing
regulated gencos and IPPs.
Bunching up of capacity driving accelerated execution
Accelerated pace of generation capacity additions, with ~100GW of projects to be
commissioned by FY15, will drive investment in transmission. PGCIL is also setting
up nine HSTCs to evacuate 42GW of capacity, generated by IPPs. These are due for
commissioning over 3-4 years, and will necessitate accelerated execution by PGCIL.
PGCIL's projects under construction increased from Rs400b in FY09 to Rs810b in
FY10 and to Rs839b in March 2011.
Capitalization of Rs225b over FY12-13
We expect PGCIL to achieve the targeted Eleventh Plan capex spending of Rs550b,
given incremental capex towards HSTCs. Over FY09-11, PGCIL’s capex was Rs323b
and the targeted spending over FY12-13 is Rs342b. During the Twelfth Plan (FY13-
17), targeted capex is Rs1t+, ~2x the Eleventh Plan capex. In comparison, addition
to gross block has been an average of Rs33b a year over FY08-10 and is expected to
be Rs225b over FY12-13 (Rs74b achieved in FY11 against a target of Rs90b), indicating
a meaningful ramp-up.
Contribution from other segments increases, telecom tower lease may
provide upsides
PGCIL benefits from three associated activities (1) consultancy income (FY11 EBIT
of Rs1.7b), (2) ST open access charges (FY11 Rs2.1b), and (3) telecom bandwidth
lease (currently marginal contributor, FY11 PBT Rs334m). These streams have
accounted for 15% of PAT in FY11 (v/s 6% in FY08) and pose exciting growth
opportunities ahead. Besides, PGCIL has invited tenders to lease telecom towers
and bids are under evaluation for four circles, J&K, HP, Punjab and Haryana. All
PGCIL's new initiatives are largely capital neutral and will aid reported RoE.
We expect EPS CAGR of 18% until FY13E
We expect PGCIL’s regulated asset base (RAB) to increase from Rs135b in March
2011 to Rs203b by FY13 (up ~50%), with projects of ~Rs225b being commissioned
and capitalized during this period. We expect the company to post net profit of Rs31b
in FY12 (up 20%) and Rs35b (up 15%). Maintain Buy, with a target price of Rs125.
No comments:
Post a Comment