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At the cusp of a big leap
Consolidated PAT to witness 37% CAGR till FY13, value unlocking possibilities exist
PTC India is likely to witness strong business momentum, driven by the addition of
~4.6GW of projects to its LT trading portfolio over FY12/13. In addition, the tolling
arrangements (350MW) will start contributing meaningfully to cash flows in FY12/13. PFS
continues to be on a strong footing, post the recent IPO. We expect consolidated profit
to double from Rs1.7b in FY11 to Rs3.2b in FY13. Defaults on few LT PPAs, lower ST prices
impacting margins, and exposure to a single project/group are key risks in our view.
Power trading volumes to double by FY13; long-term drivers intact
PTC India has a long-term (LT) power trading portfolio of ~1GW. We expect the addition
of 1.7GW in FY12 and 2.9GW+ in FY13. We believe trading volumes will increase
from 24.5BU in FY11 to 28.6BU in FY12 (up 17%) and 38.4BU in FY13 (up 34%).
Also, the composition of trading volumes is changing, with the share of low-margin
cross-border trades expected to decline from 22% in FY11 to 9% in FY13.
PTC Financial Services (PFS) on strong footing; earnings CAGR of
52% till FY13
As at March 2011, PFS' equity base was Rs4.6b and net worth was Rs6.8b, which
will increase to Rs5.6b and Rs10.2b, respectively post issue. Being a relatively new
company, PFS' loan book has grown at a rapid pace from Rs200m in FY09 to Rs2.7b
in FY10 and further to Rs8b as at end-FY11. Equity investments increased from Rs1.4b
in FY08 to Rs4.6b by December 2010. We expect PFS to report a net profit of Rs875m
in FY13, up from Rs95m in FY09 and Rs377m in FY11 (CAGR of 52%), driven by
increased disbursements.
PTC Energy witnessing business traction, driven by tolling projects
100% subsidiary, PTC Energy's tolling arrangement will start contributing to profitability
from FY12, as 350MW of capacity is available for sale. The management has tied up
coal supply for the project for 10 years, with fixed CIF price for five years (subject to a
floor and cap). Based on the current fuel rates, we estimate fuel cost at Rs2.2/unit.
We believe that this provides earnings possibilities of Rs577m in FY12 and Rs884m in
FY13.
Cash on books provides downside protection; Buy
PTC has cash and equivalents of Rs9.6b, and has investments of Rs7b in subsidiaries/
project SPVs. We expect PTC to report consolidated net profit of Rs2.5b in FY12 (up
47%) and Rs3.2b in FY13 (up 28%). Maintain Buy, with a price target of Rs127.
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