MOSL: POWER GRID CORPORATION (Buy)-Capitalization momentum drives strong earnings growth
​Power Grid Corporation: Capitalization momentum drives strong earnings growth; Capitalization run-rate of INR300-350b p.a. over next 3-4 years
(PWGR IN, Mkt Cap USD16.5b, CMP INR204, TP INR242, 19% Upside, Buy)
- 4QFY17 standalone adj. PAT rose 22% YoY to INR19.2b, below estimate of INR23.2b, due to pay revision provision and lower consultancy income. Capitalization in 4QFY17 was higher at INR130b (est. of INR120b), while capex was in line at ~INR58b. For FY17, PAT grew 29% YoY to INR75b. Capitalization (incl. TBCB) was at INR320b and capex at INR240b in FY17.
- Capital efficiency keeps improving: CWIP was down from ~INR46.8b in FY16 to INR39.8b in FY17 on strong capitalization momentum and further decline in construction stores inventory (from INR12.9b YoY to INR10.7b).
- Strong capitalization momentum to continue: With ~INR1.3t worth of commissioning pending, management is guiding for capitalization run-rate of ~INR300-350b p.a. (incl. TBCB) over next 3-4 years. Major projects expected in FY18 are in Exhibit 3.
- RE and intra-state growth opportunities: Rising RE (new solar parks of 20GW, wind 30GW, nuclear 7GW) and intra-state transmission (INR1.5t market potential) would provide growth opportunities. The above projects are over and above the ~INR1t opportunity identified by CEA for 13th plan.
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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