Power Grid reported Q2FY19 results that were below our estimates as lower-than-expected revenues and higher-than-expected other expenses marred profitability. Even on the asset capitalisation front, asset addition was below expectations Reported revenues came in at Rs 8283 crore vs. estimate of Rs 8447.3 crore. Transmission revenues for Q2FY19 grew 15% YoY. On the other hand, consultancy revenues grew 19% YoY. On the flip side, telecom revenues declined ~7% YoY EBITDA came in at Rs 6972.5 crore, significantly below our estimate of Rs 7306.9 crore. Higher-than-expected other costs at Rs 857.6 crore vs. estimates of Rs 675.8 crore was the key reason for the shortfall PAT was at Rs 2309 crore vs. our estimate of Rs 2433.8 crore mainly on the back of lower revenues and EBITDA.
OutlookChallenges will emerge from lower RoEs from competitively bid projects and projects visibility post FY20E. In our view, this will restrict expansion of investment multiples. We continue to value the company at 1.5x and maintain our target price of Rs 215.
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