IDFC Securities - Power Grid Company of Bangladesh Ltd (POWERGRID) Power Grid Corporation of Indias Q4FY19 results (Outperformer) - FY20 guidance hostage to one large project

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IDFC Securities

Shirish Rane

Power Grid Corporation of India's Q4FY19 results (Outperformer) - FY20 guidance hostage to one large project

Q4FY19 result highlights

PGCIL’s projects capitalized in Q4FY19 were Rs92bn (+9% yoy) - standalone at Rs65bn (-16% yoy) and Rs26bn (vs Rs6bn) of TBCB projects. Total projects capitalised in FY19 was Rs258bn (-8% yoy_) – Rs193bn in Standalone and Rs65bn in tariff based competitive bid projects) in line with the expectation. We expect total capitalisation of Rs200bn in Standalone Company and nothing in tariff based competitive bid projects in FY20E (under subsidiaries).
PGCIL incurred capital expenditure of Rs76bn (-4% yoy) in Q4FY19. FY19 capital expenditure was Rs258bn, flat yoy - standalone basis at Rs218bn. a decline of 4% and TBCB projects of Rs40bn (+34% yoy)
Net sales increased by 18%/17% yoy to Rs95bn/351bn in Q4FY19/FY19. Transmission revenues increased by 20%/15% yoy to Rs90bn/Rs333bn aided by commissioning of projects worth Rs271bn in the past five quarters.
Adjusted PAT grew by 29%/14% yoy to Rs27bn (vs est of Rs23bn)/Rs96bn in Q4FY19/FY19. The profit has been adjusted for changes in accounting for deferred tax expense (details later).
PGCIL guided for commissioning of Rs210bn which is dependent on completion of Raichur Pugalur HVDC line (Rs147bn – scheme 1) . As per CEA, the project is facing severe RoW issues in Tamil Nadu

Key positives: FY19 commissioning of Rs258bn; Dividend of Rs8.3/share (vsRs5.3/share in FY18)

Key negatives: Dwindling cost plus projects; Very few bids concluded in FY19; Increase in receivables

Impact on financials: We maintain our earnings estimates in FY20E/FY21E

Valuations & view

We expect PGCIL’s earnings to register a 12% CAGR over FY19-21E, led by a 12% CAGR in regulated (invested) equity in the transmission business. We believe current valuations of 8.4x FY21E standalone earnings, 1.3x FY21E P/BV and 16%FY21E ROE are cheap considering the strong earnings growth profile over the next 2 years. We reiterate Outperformer rating with a based target price to Rs240 (12xFY20 earnings).

30/05/2019 1 EN

Underlying

Power Grid Company of Bangladesh Ltd

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BD0308PGCB07 Dhaka Stock Exchange Bangladesh

Provider

IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

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Analysts

Shirish Rane

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Power Grid Corporation of India's Q4FY19 results (Outperformer) - FY20 guidance hostage to one large project

Investment Opportunities in Bangladesh Power Sector 2021

GMR Infrastructure's Q3FY20 results (Outperformer) - Air traffic growth improved at the airports; deleveraging process gains momentum

Ambuja Cement's Q4CY19 results (Outperformer) - In line; cost efficiencies at play

Event update: Aurobindo Pharma (Outperformer) - Unit IV receives EIR; positive outcome

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