PTC India's Q3FY19 results (Outperformer) - Inline quarter; volume declined by 9%
Q3FY19 result highlights
- Power trading volumes declined by 9% yoy to 12.9bn Kwh in Q3FY19. Short term bilateral volume declined by 37% yoy to 2.0bn Kwh; short term exchange volume declined by 5% to 4.9bn Kwh while long term volume and medium term volume grew by 2% to 6.0BU.
- Gross margin (incl. surcharge and rebate) for Q3FY19 was 8.70ps/Kwh (increase of 1.5ps/Kwh) and Gross adjusted margin (excluding surcharge and rebate income) for Q3FY19 was 4.11ps per Kwh (increase of 0.06ps/kwh). The increase in margin in Q3FY19 was primarily related to the volume mix in favour of long term (47% vs 42% in Q3FY18)
- As a result, it reported a profit of Rs514m (vs our estimate of Rs513m) Note that the surcharge and rebate income was Rs359m and Rs236m.
- PTC has started scheduling 400MW of Wind power from SECI – 1 bids of 1050MW. Balance 650MW is likely commence supply power in next 3 to 6 months (addition of 2.25BU for 25 years)
- PTC has finalised PSA and PPA for the 3 year medium term supply of power from the stressed assets (Supply to commence in next three to four months >10BU). Another round of 2500MW has been announced.. It has also started supply under contract for 200MW Bangladesh contract for a short term agreement of 18 months which will be replaced by a long term agreement of 15 years.
Key positives: Announcement of 2.5GW of medium term PPA (Aggregator is yet to be appointed)
Key negatives: Decline in Volumes of 9% in the quarter
Impact on financials: Decrease our earnings estimates for FY19E by 3% and introduce our FY20E EPS of Rs11/share.
Valuations & view
We believe PTC is attractively valued at 7.5x FY20E standalone earnings and 0.8x FY20E BV in view of 15% 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 with a revised target price of Rs107/share (to account for decline in PTC Financials market price). 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
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.