PTC India's Q1FY19 results (Outperformer) - Results inline; Volume growth at 18% yoy
Q1FY19 result highlights
- The power trading volumes increased by 18% yoy to 16.9bn Kwh in Q1FY19. Short term bilateral volume grew by 39% to 3.6bn Kwh, short term exchange volume grew by 21% to 6.3bn Kwh while long term volume grew by 13% to 6.1BU.
- Gross margin (incl. surcharge and rebate) for Q1FY19 was 6.5ps per kwh (decline of 0.67ps/kwh) and Gross adjusted margin (excluding surcharge and rebate income) for Q1FY19 was 4ps per Kwh (decline of 0.41ps/Kwh). The decline in margin in Q1FY19 was primarily related to the volume mix in favour of short term (60% compared to 54% in FY18). In addition, a considerable portion of short term bilateral was from banking in the quarter, where margins are lower.
- As a result, PAT was Rs614m for Q1FY19, ahead of estimate of Rs484m. Excluding surcharge income of Rs208m, the adjusted PAT was flat at Rs505m (est of Rs484m).
- PTC has further started supply under 400MW long term contract in the quarter (200MW from Karcham to Punjab and 200MW from Teesta to Uttar Pradesh).
- Under 2500MW medium term bid (3 years) for stressed assets, bids have been received for 1900MW. PTC is in negotiations with state utilities to finalise the contract. On finalisation of contracts, the supply can commence from October 2018. It has also emerged as L1 under a 200MW Bangladesh contract for a long term contract till 2033.
Key positives: Volume growth of 18% yoy in Q1FY19; Roll over of existing 250MW Bangladesh contract by 3 months
Key negatives: Adjusted gross margin declined to 4ps/Kwh yoy
Impact on financials: Maintain our earnings estimates for FY19E/FY20E
Valuations & view
We believe PTC is attractively valued at 8x FY20E standalone earnings and 0.8x FY20E BV in view of 19% CAGR in long-term, cross border and medium term trading volumes which will lead to 15% core earnings growth over FY18-20E. In addition, we expect investments in PTC Energy to be monetised over the next one to two years. We reiterate our Outperformer rating. Slower-than-expected volume growth especially in short term and delay in value unlocking from investments is a key downside risk to our call
PTC India Limited (PTC) is a holding company. The Company is engaged in the business of power and investment. It is involved in the trading of electricity and offers power trading solutions in India. Its segments include Power and Investment. It offers business solutions for generators, utilities, cross border solutions, PTC retail, project financing, renewable energy, and energy efficiency and consultancy. It offers PTC retail solutions to public sector undertakings (PSUs) and Central PSUs, Corporates, Industrial Clients, Commercial Clients, and independent power producers (IPPs) and captive power produces (CPPs). It offers facilitation of power sale and purchase on power exchange, which include sale/purchase on day ahead market (DAM) and sale/purchase on term ahead market (TAM). It offers Long and Medium Term Sales, Short Term Sales and Power Banking Arrangements. Through PTC India Financial Services Limited, it offers debt financing on non-recourse or on limited recourse basis
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