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Q1FY12 result highlights
Quarterly performance: PTC’s Q1FY12 PAT Rs483mn (+73%yoy) was sharply above estimate due to relatively large
quantum of rebate income (Rs230mn during the quarter vs Rs37mn in Q1FY11). Traded power volumes increased 17%yoy
to 6.73bn units, while traded power margins increased 8.5%yoy to Rs0.041/unit. Although sales fell 10%yoy to Rs24.8bn due
to yoy fall in merchant tariffs, EBITDA (boosted by higher rebate income) jumped 88%yoy to Rs506mn. Interest costs spiked
to Rs14mn (compared to Rs1mn in Q1FY11), as the company borrowed for short term during the quarter to meet working
capital needs. PAT increased 73%yoy to Rs483mn, while reported PAT (adjusted for loss during sale of assets) increased
63%yoy to Rs452mn.
Key positives: 8.5%yoy increase in traded power margins to Rs0.041/unit, and 17%yoy increase in volumes to 6.73bn units.
Key negatives: Sharp jump in interest costs to Rs14mn during quarter (compared to Rs1mn in Q1FY11 and Q4FY11) due to
short term borrowing. Although the debt has been repaid, the need to raise short term debt indicates increase in working
capital needs due to delays in receipt of payments from SEBs such as Tamil Nadu.
Impact on financials
We expect the situation of delayed payments from few SEBs such as Tamil Nadu to continue, which is expected to increase
working capital requirements leading to higher interest. However, on the positive side the payment delays would also result
in higher rebate income, as reflected in Q1FY12 results. Consequently, we have increased our estimate for rebate income
leading to increase in earnings estimate for FY12 and FY13 by 11% and 4% to Rs5.29/share and Rs5.59/share respectively.
Valuations & view
PTC’s strategy of tying up power volumes through long term PPAs and tolling arrangements is expected to ensure traded
power volumes in the long term. However the company is also likely to witness pressure on margins due to increased
competition in power trading business. Consequently, in spite of underperforming the Sensex by 33% over past 12 months,
we believe the stock currently trading at 14x FY12E earnings does not provide material upside to investors. We maintain
Neutral rating on the stock with SOTP fair value estimate Rs85/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q1FY12 result highlights
Quarterly performance: PTC’s Q1FY12 PAT Rs483mn (+73%yoy) was sharply above estimate due to relatively large
quantum of rebate income (Rs230mn during the quarter vs Rs37mn in Q1FY11). Traded power volumes increased 17%yoy
to 6.73bn units, while traded power margins increased 8.5%yoy to Rs0.041/unit. Although sales fell 10%yoy to Rs24.8bn due
to yoy fall in merchant tariffs, EBITDA (boosted by higher rebate income) jumped 88%yoy to Rs506mn. Interest costs spiked
to Rs14mn (compared to Rs1mn in Q1FY11), as the company borrowed for short term during the quarter to meet working
capital needs. PAT increased 73%yoy to Rs483mn, while reported PAT (adjusted for loss during sale of assets) increased
63%yoy to Rs452mn.
Key positives: 8.5%yoy increase in traded power margins to Rs0.041/unit, and 17%yoy increase in volumes to 6.73bn units.
Key negatives: Sharp jump in interest costs to Rs14mn during quarter (compared to Rs1mn in Q1FY11 and Q4FY11) due to
short term borrowing. Although the debt has been repaid, the need to raise short term debt indicates increase in working
capital needs due to delays in receipt of payments from SEBs such as Tamil Nadu.
Impact on financials
We expect the situation of delayed payments from few SEBs such as Tamil Nadu to continue, which is expected to increase
working capital requirements leading to higher interest. However, on the positive side the payment delays would also result
in higher rebate income, as reflected in Q1FY12 results. Consequently, we have increased our estimate for rebate income
leading to increase in earnings estimate for FY12 and FY13 by 11% and 4% to Rs5.29/share and Rs5.59/share respectively.
Valuations & view
PTC’s strategy of tying up power volumes through long term PPAs and tolling arrangements is expected to ensure traded
power volumes in the long term. However the company is also likely to witness pressure on margins due to increased
competition in power trading business. Consequently, in spite of underperforming the Sensex by 33% over past 12 months,
we believe the stock currently trading at 14x FY12E earnings does not provide material upside to investors. We maintain
Neutral rating on the stock with SOTP fair value estimate Rs85/share.
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