QUARTERLY OUTLOOK & RECOMMENDATION
Power Grid Corporation Of India continued with its double digit growth in fourth quarter FY17 as Revenue/Income from operations and PAT moved at 17% & 22% respectively YOY. Income from Operations stood at Rs. 67120 Mn in Q4 FY17 compared to Rs. 57405 Mn in the same period previous year. Profit After Tax rose to Rs. 19164 in the current quarter from Rs. 15686 Mn in the same quarter previous year. Earnings before Depreciation Interest & Tax jumped 13% and stood at Rs. 59610 Mn whereas other income climbed at a higher rate of 40% from Rs. 2440 Mn to Rs. 3424 Mn in the present March quarter. Operating cost for the quarter stood at Rs. 31568 Mn in the current quarter against Rs. 24563 Mn corresponding quarter previous year rising 29% YOY and 20% sequentially. As a result EBDITA Margin declined 347 basis points on yearly basis and stood at 88.81% in the March quarter. Net Profit Margin jumped 123 basis points YOY at 28.55% in Q4 FY17 but declined 56 basis points sequentially. One basis point is 0.01%. Transmission & Telecom segments performed well growing 18% & 35% respectively YOY. Sequential growth was reported at 4% & 3% respectively in the current quarter. The company has three main revenue segments, Transmission, Consultancy and Telecom. Consultancy business has declined both YOY and quarterly and constitutes only 2% of revenues. Power Grid Corporation of India transmits more than 45% of power generated in India. Transmission segment contributes 96% of the total income and Consultancy & Telecom contributing the rest equally. Though major revenue driver is transmission business, company is leveraging its electricity network topology to form optic fiber network for long distance telecommunication network. Power Grid Corporation Of India has further diversified its revenue basket by providing consultancy services to State owned Utilities, private utilities, government departments etc.
In the present scenario with government reforms giving huge fillip to power & infrastructure, Electric Utilities sector stands to gain in the long run. Thus we are bullish on the stock for medium and long term. We recommend BUY for the stock for medium & long term investment with PE multiple of 12.42 x FY18E & 10.71 x FY19E with a target price of Rs. 295.
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About Suhani Adilabadkar
Suhani Adilabadkar is a Research Analyst registered with SEBI ((INH200003240)) She has done PGDBA (Finance), MS (Finance) and a Fellowship from Insurance Institute of India. She maintains a blog where she publishes research reports across industries - oasisfundamentals.blogspot.in.
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