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India Equity Research Reports, IPO and Stock News
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What’s the theme?
With 68% of the XIth Plan targeted capex of Rs550bn already spent over the first four years, PGCIL is the
only company in the power sector to be on track to meet its capex guidance. This, coupled with increased
capex run-rate should translate into 21% CAGR in its regulated equity base over FY11-15E. In addition,
the company is insulated from risks of rising fuel cost and SEB defaults (as payments are secured through
a tripartite agreement). We believe the stock offers safe and steady returns compared with its private
sector peers.
What will move the stock?
1) Conversion of the large CWIP into regulatory assets translating into increased earnings for the company,
2) Increase in capex run-rate to meet its XIIth Plan target of Rs1.2tn (which is more than double its XIth
plan target) 3) Increased capex leading to higher capitalisation and resulting in higher earnings and
4) Turnaround of the telecom division.
Where are we stacked versus consensus?
Our PAT estimate for FY12 and FY13 is lower than consensus by 3% and 1% respectively. We value
PGCIL on FCFE basis to arrive at a target price of Rs122 (terminal growth rate 3% and 14% Ke)
What will challenge our target price?
1) Delays in capitalisation of projects under construction.
2) Lower incentives and STOA income impact earnings estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What’s the theme?
With 68% of the XIth Plan targeted capex of Rs550bn already spent over the first four years, PGCIL is the
only company in the power sector to be on track to meet its capex guidance. This, coupled with increased
capex run-rate should translate into 21% CAGR in its regulated equity base over FY11-15E. In addition,
the company is insulated from risks of rising fuel cost and SEB defaults (as payments are secured through
a tripartite agreement). We believe the stock offers safe and steady returns compared with its private
sector peers.
What will move the stock?
1) Conversion of the large CWIP into regulatory assets translating into increased earnings for the company,
2) Increase in capex run-rate to meet its XIIth Plan target of Rs1.2tn (which is more than double its XIth
plan target) 3) Increased capex leading to higher capitalisation and resulting in higher earnings and
4) Turnaround of the telecom division.
Where are we stacked versus consensus?
Our PAT estimate for FY12 and FY13 is lower than consensus by 3% and 1% respectively. We value
PGCIL on FCFE basis to arrive at a target price of Rs122 (terminal growth rate 3% and 14% Ke)
What will challenge our target price?
1) Delays in capitalisation of projects under construction.
2) Lower incentives and STOA income impact earnings estimates.
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