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UBS Investment Research
Power Grid Corporation of India
Q 1 FY12 results: Revenues up 10% YoY
Event: Q1 FY12 Revenues up 10% YoY
In Q1 FY12, Power Grid reported 10% YoY growth in revenue to Rs22bn with an
EBITDA of Rs18.5bn (+10% y/y) and EBITDA margin of 84%. Reported PAT at
Rs7.1bn and recurring PAT (after adjustments of prior period items of Rs12.5m
and Forex gains of Rs42.5m) of Rs7bn were flat YoY. The results are marginally
below UBS estimates (Rs7.6bn) and largely in line with consensus (Rs7.2bn).
Impact: Consultancy segment revenue declined 23% YoY
Transmission segment revenues (93% of total revenues) grew 11% YoY to
Rs20.4bn, consultancy segment revenues were at Rs561m (-23% YoY) and
telecom segment revenues were up 3% YoY to Rs454m. Revenues from shortterm
open access increased 27% YoY to Rs569m.
Action: Very good defensive in a natural monopoly sector
We think Power Grid will be a key beneficiary of growth in the transmission
sector; it already has more than 50% market share and we expect this to increase
We believe Power Grid has significant advantages: 1) the low-risk nature of its
business, with ROE of 15.5% plus incentives totalling 17-18%; and 2) as the
central transmission utility, it has been assigned the role of coordinator in the
sector.
Valuation: Buy rating and price target of Rs135
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool, assuming 10.1% WACC.
Power Grid Corporation of India
Power Grid Corporation of India (Power Grid) is the government-appointed
central power transmission utility of India. The company is one of the largest
transmission utilities in the world with more than a 50% market share in India.
Power Grid has diversified into telecom and established a telecom network of
more than 21,000km across the country. It also has a robust consultancy
business.
Statement of Risk
The key downside risks for the Power Grid are: 1) slower-than-expected
execution of projects; 2) availability of contractors/equipment; 3) competition;
4) lower-than-expected capex; 5) delay in generation projects; and 6) majority
government ownership and control.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Power Grid Corporation of India
Q 1 FY12 results: Revenues up 10% YoY
Event: Q1 FY12 Revenues up 10% YoY
In Q1 FY12, Power Grid reported 10% YoY growth in revenue to Rs22bn with an
EBITDA of Rs18.5bn (+10% y/y) and EBITDA margin of 84%. Reported PAT at
Rs7.1bn and recurring PAT (after adjustments of prior period items of Rs12.5m
and Forex gains of Rs42.5m) of Rs7bn were flat YoY. The results are marginally
below UBS estimates (Rs7.6bn) and largely in line with consensus (Rs7.2bn).
Impact: Consultancy segment revenue declined 23% YoY
Transmission segment revenues (93% of total revenues) grew 11% YoY to
Rs20.4bn, consultancy segment revenues were at Rs561m (-23% YoY) and
telecom segment revenues were up 3% YoY to Rs454m. Revenues from shortterm
open access increased 27% YoY to Rs569m.
Action: Very good defensive in a natural monopoly sector
We think Power Grid will be a key beneficiary of growth in the transmission
sector; it already has more than 50% market share and we expect this to increase
We believe Power Grid has significant advantages: 1) the low-risk nature of its
business, with ROE of 15.5% plus incentives totalling 17-18%; and 2) as the
central transmission utility, it has been assigned the role of coordinator in the
sector.
Valuation: Buy rating and price target of Rs135
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool, assuming 10.1% WACC.
Power Grid Corporation of India
Power Grid Corporation of India (Power Grid) is the government-appointed
central power transmission utility of India. The company is one of the largest
transmission utilities in the world with more than a 50% market share in India.
Power Grid has diversified into telecom and established a telecom network of
more than 21,000km across the country. It also has a robust consultancy
business.
Statement of Risk
The key downside risks for the Power Grid are: 1) slower-than-expected
execution of projects; 2) availability of contractors/equipment; 3) competition;
4) lower-than-expected capex; 5) delay in generation projects; and 6) majority
government ownership and control.
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