MOSL: POWER GRID (Buy)- Inline-Capitalization momentum on track-Valuations not appreciating even nominal growth
​Power Grid:Inline; Capitalization momentum on track; Valuations not appreciating even nominal growth; Re-iterate Buy
(PWGR IN, Mkt Cap USD17.4b, CMP INR211, TP INR261, 24% Upside, Buy)
- Power Grid's (PWGR) 2QFY18 PAT grew 14% YoY to INR21.4b (est. INR20.9b). Capitalization was up ~50% YoY to INR99.7b. The 1H capitalization of ~INR135b (up 47% YoY) represents ~50% of the estimate for the full year FY18. Capex was up ~26% YoY to INR67b in 2QFY18.
- Telecom revenue/EBIT grew 21%/45% YoY in 2QFY18. The business has grown at CAGR of ~23% over FY14-17, which is expected to continue.
- Consultancy revenue/EBIT was down 25%/36% YoY in 2QFY18 due to certain payment issues. There is good potential in consultancy with opportunity of INR100b from Kerala (10% fees) and INR350b from railways, amongst others.
- States would be coming out with TBCB projects. The near-term potential is ~INR47b. TBCB projects are attractive as they do not have regulatory risk. PWGR has the largest share at ~45% of participated TBCB bids (based on annual levelized transmission charges). PWGR is also pursuing JVs with states.
- PWGR is also working on opportunity in telecom towers. It has competitive advantage of low electricity and land cost. Of its ~250k towers, ~8-10% can be deployed as telecom towers.
Power Grid Corp. of India is a power transmisson utilities company. Co. is engaged in the planning, coordination, supervision and control over inter-state transmission system and operation of national & regional power grids. Co.'s Power System Management business takes continuous action regarding operation and maintenance to seek to ensure compliance with prescribed standards as well as to achieve high availability of the system. In the telecom business, Co.'s brand name "POWERTEL" is the only utility in India having an overhead optic fiber network using optical ground wire on power transmission lines.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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