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Lower capex guidance for FY20; downgrade to Hold
* Power Grid’s (PGCIL) asset capitalization rose 10.3% yoy to Rs92.2bn in Q4FY19 (TBCB – Rs2.7bn), below our est. of Rs10.4bn. Capitalization for FY19 was at Rs258.7bn. Capex stood at Rs75.6bn (down 4.2% yoy) in Q4FY19 and at Rs258.1bn for FY19.
* Revenues (after adjusting for prior period sales) increased 12.4% yoy to Rs87.8bn, driven by 19.5% yoy and 11.6% yoy growth in Transmission and Telecom businesses. EBITDA margins remained flat at 83.8% yoy. PAT grew 30.6% yoy to Rs26.2bn in Q4FY19.
* PGCIL has guided for subdued capex of Rs150bn for FY20 and aims to capitalize assets worth Rs200bn-Rs240bn in the next year (No TBCB project is expected to be commissioned in FY20).
* We have lowered annual capitalization target to ~Rs210bn for FY20 from Rs240bn earlier, factoring in the pace of project executions. Accordingly, we have cut FY21E earnings and TP to Rs212 (from Rs224). Downgrade the stock to Hold rating and go UW in sector EAP.
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