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PTC India’s (PTC) adjusted (for rebate income) Q2FY12 PAT of INR255mn
was significantly below consensus and our estimates of INR455mn and
INR305mn, respectively. Delay in SEB payments led to ~INR4bn working
capital borrowings and trading volumes also took a hit. Management
indicated that there are early signs of reforms which should reduce
payment delays/reinstate volumes. We remain cautious and hence cut
earnings estimates by 28% for FY12. We maintain ‘BUY’ with SOTP based
target price of INR82/share.
PAT significantly below estimate; margin dips 10.6%
PTC reported PAT of INR355mn; adjusting for rebate reversals of INR137mn PAT
(adjusted) of INR255mn was significantly lower than estimate. While volumes surged
~12%, lower realisation of INR2.7/kwh (3.2/kwh last year) resulted in margin falling by
INR0.042/kwh from INR0.047/kwh last year.
Weak SEB financials impact business, but management optimistic
Management indicated that the business (both volumes and margins) was impacted by
weak financials of SEB with dues from TNEB and UPPCL alone aggregating ~INR10bn.
While incrementally PTC has capped supplies/entered with pass through clauses with
generators, it expects the opportunity loss to dent FY12E earnings. However,
management believes that recent tariff hikes by some SEBs and structural changes
mooted by state regulators are likely to resolve the problem and benefits will start
accruing in H2FY12.
Outlook and valuations: Strong headwinds; maintain ‘BUY’
We have factored increased working capital requirements, weak growth outlook (delay
in commissioning of Teesta urja project) and margin pressures and cut our earnings
estimates by 28% and 44% for FY12 and FY13, respectively. We have also reduced the
DCF value of the power trading business to INR 21/share from INR38/share earlier.
While the revised SOTP indicates upsides, we believe the stock will be under pressure
due to the ongoing sector concerns. We maintain ‘BUY’ recommendation but revise
SOTP downwards to INR 82/share (126/share earlier).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
PTC India’s (PTC) adjusted (for rebate income) Q2FY12 PAT of INR255mn
was significantly below consensus and our estimates of INR455mn and
INR305mn, respectively. Delay in SEB payments led to ~INR4bn working
capital borrowings and trading volumes also took a hit. Management
indicated that there are early signs of reforms which should reduce
payment delays/reinstate volumes. We remain cautious and hence cut
earnings estimates by 28% for FY12. We maintain ‘BUY’ with SOTP based
target price of INR82/share.
PAT significantly below estimate; margin dips 10.6%
PTC reported PAT of INR355mn; adjusting for rebate reversals of INR137mn PAT
(adjusted) of INR255mn was significantly lower than estimate. While volumes surged
~12%, lower realisation of INR2.7/kwh (3.2/kwh last year) resulted in margin falling by
INR0.042/kwh from INR0.047/kwh last year.
Weak SEB financials impact business, but management optimistic
Management indicated that the business (both volumes and margins) was impacted by
weak financials of SEB with dues from TNEB and UPPCL alone aggregating ~INR10bn.
While incrementally PTC has capped supplies/entered with pass through clauses with
generators, it expects the opportunity loss to dent FY12E earnings. However,
management believes that recent tariff hikes by some SEBs and structural changes
mooted by state regulators are likely to resolve the problem and benefits will start
accruing in H2FY12.
Outlook and valuations: Strong headwinds; maintain ‘BUY’
We have factored increased working capital requirements, weak growth outlook (delay
in commissioning of Teesta urja project) and margin pressures and cut our earnings
estimates by 28% and 44% for FY12 and FY13, respectively. We have also reduced the
DCF value of the power trading business to INR 21/share from INR38/share earlier.
While the revised SOTP indicates upsides, we believe the stock will be under pressure
due to the ongoing sector concerns. We maintain ‘BUY’ recommendation but revise
SOTP downwards to INR 82/share (126/share earlier).
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