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PWGR’s 2QFY12 adjusted profit at Rs7.8bn (up 31% yoy) was higher than our estimate of
Rs7.3bn, primarily on higher other income. In the quarter, PWGR capitalised ~Rs32bn worth of
assets, taking 1HFY12 capatilisation at ~Rs40bn, in line to achieve our estimate of Rs80bn for
FY12. Buy.
Better than expected earnings on higher other income
PWGR's 2QFY12 results were better than our estimate primarily on higher other income vs
estimate.
In 2QFY12, PWGR adjusted sales at Rs22.7bn (up 6.7% yoy) and adjusted EBITDA at
Rs19.2bn (up 7.6% yoy) were in line with our estimate of Rs22.9bn and Rs19.2bn,
respectively.
However, adjusted profit at Rs7.8bn (up 31% yoy) was higher than our estimate of Rs7.3bn,
largely due to higher other income at Rs1.94bn (up 102% yoy).
Other income was higher due to dividend income from JVs received in the quarter at
~Rs200m (dividend income was booked in 1Q in FY11 vs 2Q in FY12) and ~Rs400m interest
received on bills arrears from various SEBs.
Broad break-up of other income: 1) interest from banks Rs780m, 2) interest on bills arrears
from various SEBs Rs400m, 3) interest on bonds Rs250m, 4) lease income Rs120m, 5)
dividend income Rs200m, 6) miscellaneous income Rs192m.
Note that 2QFY12 revenue and PBT did not include the contribution from POSOCO assets
(included in 2QFY11 revenue at Rs815m and PBT at Rs186m), which has been transferred to
100% subsidiary in October 2010. Hence, ULDC/RLDC revenue and PBT is not comparable
yoy.
Also, O&M expenditure includes system operating charges of Rs195m for 1HFY12 (Rs50m
for 2QFY12) for which revenue has not been booked pending finalisation by the regulator.
Strong capitalisation in the quarter
In the quarter, PWGR capitalised ~Rs32bn worth of assets, taking 1HFY12 capatilisation at
~Rs40bn ( down 24% YoY).
Note that PWGR capitalised Rs73bn worth of assets in FY11, with very strong capitalisation
contribution in 1HFY11 at 72% of total. Hence, lower capitalisation yoy in 1HFY12 is not a
cause for concern.
We project PWGR will capitalise Rs80bn in FY12 and capatilisation, so far, gives us
confidence that our projection should be achieved.
We prefer PWGR to other Indian utilities; maintain Buy
We prefer PWGR to other Indian utilities as: 1) it is partially insulated from coal shortage
issues faced by power generators; 2) low risk to our earnings CAGR of 14% over FY11-14F;
3) it factors in no tax arbitrage profits (NTPC and NHPC do) and so there is no downside risk
from this; and 4) we think the stock should outperform given its earnings quality, strong
momentum and sustainable ROE. At P/BV of 1.8x FY13F BV, valuations look reasonable to
us.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
PWGR’s 2QFY12 adjusted profit at Rs7.8bn (up 31% yoy) was higher than our estimate of
Rs7.3bn, primarily on higher other income. In the quarter, PWGR capitalised ~Rs32bn worth of
assets, taking 1HFY12 capatilisation at ~Rs40bn, in line to achieve our estimate of Rs80bn for
FY12. Buy.
Better than expected earnings on higher other income
PWGR's 2QFY12 results were better than our estimate primarily on higher other income vs
estimate.
In 2QFY12, PWGR adjusted sales at Rs22.7bn (up 6.7% yoy) and adjusted EBITDA at
Rs19.2bn (up 7.6% yoy) were in line with our estimate of Rs22.9bn and Rs19.2bn,
respectively.
However, adjusted profit at Rs7.8bn (up 31% yoy) was higher than our estimate of Rs7.3bn,
largely due to higher other income at Rs1.94bn (up 102% yoy).
Other income was higher due to dividend income from JVs received in the quarter at
~Rs200m (dividend income was booked in 1Q in FY11 vs 2Q in FY12) and ~Rs400m interest
received on bills arrears from various SEBs.
Broad break-up of other income: 1) interest from banks Rs780m, 2) interest on bills arrears
from various SEBs Rs400m, 3) interest on bonds Rs250m, 4) lease income Rs120m, 5)
dividend income Rs200m, 6) miscellaneous income Rs192m.
Note that 2QFY12 revenue and PBT did not include the contribution from POSOCO assets
(included in 2QFY11 revenue at Rs815m and PBT at Rs186m), which has been transferred to
100% subsidiary in October 2010. Hence, ULDC/RLDC revenue and PBT is not comparable
yoy.
Also, O&M expenditure includes system operating charges of Rs195m for 1HFY12 (Rs50m
for 2QFY12) for which revenue has not been booked pending finalisation by the regulator.
Strong capitalisation in the quarter
In the quarter, PWGR capitalised ~Rs32bn worth of assets, taking 1HFY12 capatilisation at
~Rs40bn ( down 24% YoY).
Note that PWGR capitalised Rs73bn worth of assets in FY11, with very strong capitalisation
contribution in 1HFY11 at 72% of total. Hence, lower capitalisation yoy in 1HFY12 is not a
cause for concern.
We project PWGR will capitalise Rs80bn in FY12 and capatilisation, so far, gives us
confidence that our projection should be achieved.
We prefer PWGR to other Indian utilities; maintain Buy
We prefer PWGR to other Indian utilities as: 1) it is partially insulated from coal shortage
issues faced by power generators; 2) low risk to our earnings CAGR of 14% over FY11-14F;
3) it factors in no tax arbitrage profits (NTPC and NHPC do) and so there is no downside risk
from this; and 4) we think the stock should outperform given its earnings quality, strong
momentum and sustainable ROE. At P/BV of 1.8x FY13F BV, valuations look reasonable to
us.
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