MOSL: POWER GRID (Buy)-In-line performance-receivables are increasing; Strong visibility of earnings growth, valuation attractive
Power Grid: In-line performance; receivables are increasing; Strong visibility of earnings growth, valuation attractive; Maintain Buy
(PWGR IN, Mkt Cap USD13.9b, CMP INR187, TP INR231, 24% Upside, Buy)
Power Grid’s (PWGR) PAT increased ~14% YoY to INR23.3b in 3QFY19, broadly in line with our estimate. PAT adjusted for the prior period and the impact of wage revision was up ~9% YoY to INR23.6b (+9.2% YoY for 9MFY19). Receivables have nearly doubled in nine months to INR70.6b, as beneficiaries are delaying payments.
- Standalone capitalization stood at ~INR127b in 9MFY19 (INR68.6b in 3Q), as against ~INR195b in 9MFY18. The company also capitalized ~INR39b of TBCB projects during the year. PWGR guided for capitalization of INR260b for FY19 (incl. INR60b for TBCB projects). Capex stood at ~INR182b for 9MFY19.
- Telecom revenue/EBIT increased 13%/38% YoY to INR2.0b/INR1.1b in 3QFY19.
- Consultancy revenue increased 9% YoY to INR1.6b, but EBIT declined 15% YoY to INR0.7b in 3QFY19.
- Transmission revenue/EBIT grew ~13/11% YoY, along with 12% growth in derived PAT. Adj. PAT growth though was lower at ~8% YoY (adj. for prior period and wage impact) for 3QFY19.
- Management highlighted that the government has envisaged transmission projects of ~INR433b. Of these, ~INR160b are to be bid out in the next one year.
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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