ICICIdirect.com's report on Power Grid Corporation
In Q4FY15, revenues increased 18.0% YoY to Rs 4,703 crore (in line with I-direct estimate of Rs 4,709.0 crore) driven by 19.6% and 2.5% YoY growth across transmission and telecom income, respectively. This was partially offset by 7.5% YoY decline across consultancy income
Asset capitalisation totalled Rs 4,990 crore while capital expenditure was ~Rs 6,880 crore. In FY15, capitalisation and capex amounted to Rs 21,760 crore and Rs 22,460 crore, respectively. Capitalisation to capex ratio stood at 0.97x in FY15 (highest ever) compare to 0.69x in FY14
Margins improved 86 bps YoY to 90.7% as a 189 bps YoY fall in transmission margin to 58.3% in Q4FY15 was offset by 296 bps, 1437 bps improvement across consultancy, telecom segment, respectively
As per the management, the deferred tax has become a pass through to customers as per the new 2014-19 CERC tariff guideline. Accordingly, effective tax rate came in at 22% in Q4FY15 vs. 30% YoY
After adjusting for a one-off item of Rs 70 crore pertaining to employee pension provision during the quarter, adjusted PAT increased 26.1% YoY to Rs 1,483 crore in line with our estimate of Rs 1,468 crore
"We believe PGCIL commands the best growth profile (earnings CAGR of ~20.0% over FY14-17E) coupled with relatively least risky business model in the domestic utility universe. The company’s capitalisation pace is now at par with the capital expenditure for the year. The management is now aiming to increase the capitalisation-capex ratio to ~1.2x in FY16E and FY17E. This only lowers the need for dilution but reduces the risk of the same in the near future. Accordingly, we expect capitalisation to reach Rs 26662 crore for FY16E from Rs 21,764 crore in FY15. For FY17E, we expects a capitalisation of Rs 25,900 crore. Consequently, by factoring the increased pace of capitalisation, we maintain our positive outlook for Power Grid and value the company at Rs 178 by assigning a P/BV multiple of 1.9x for FY17E", says ICICIdirect.com research report.
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