IGI Logo

Stable quarter; multiple opportunities ahead

Power Grid Corporation of India (PGCIL) has reported stable numbers in Q2FY22. On consolidated basis, revenue grew 7.7% YoY to Rs102.7bn, EBITDA was up 7.9% to Rs91.1bn and reported PAT was up 9.1% at Rs33.8bn. However, adjusted PAT was up 5.6% YoY at Rs32.2bn (up 3.5% YoY at Rs31.8bn on standalone basis). For H1FY22, PGCIL’s consolidated capex stood at Rs37bn and capitalisation was Rs132.8bn. Work in hand is Rs275bn. Further, Rs265bn worth of TBCB projects are in the pipeline and the company expects award of projects to be expedited. PGCIL also intends to engage in multiple opportunities to deploy its large capital, including development of smart metering and distribution infrastructure, data centres, battery storage among others. As per the National Monetisation Plan, PGCIL is expected to monetise Rs452bn worth of transmission projects; target for FY23 is Rs75bn. Maintain BUY

* In Q2FY22, PGCIL capitalised assets worth Rs76.3bn and incurred Rs19.4bn capex at consolidated level. The company has Rs275bn of work in hand of which, Rs103bn is for ongoing projects, Rs34bn for new projects and Rs138bn for TBCB projects. Consolidated profit was up 5.6% YoY at Rs32.2bn and was aided by Rs229bn capitalisation in TTM, lower interest cost (down 5.9% YoY and 15% QoQ at Rs18.8bn) due to debt prepayment. However, other income was down 17.8% YoY at Rs2.5bn due to lower late payment surcharge income and better realisation. Consultancy income was up 75.1% YoY at Rs1.9bn; however, telecom income was flat YoY at Rs1.9bn. Outstanding receivables at Q2FY22-end was Rs49.5bn (vs Rs64.8bn in Q2FY21 and Rs70.8bn in Q1FY22-end), of which, Rs27.1bn was >45 days. PGCIL has invested further Rs4.1bn in EESL to increase its share in the company from 5.71% to 33.33%.

* Guidance maintained: PGCIL has maintained its guidance for capex of Rs75bn in FY22 (60% achieved, will achieve 90% by Dec’21-end) and capitalisation of Rs170- 200bn. For FY23E, capex target is Rs75-100bn, and capitalisation is Rs150bn. This excludes Rs24bn capex planned for smart metering and distribution infrastructure.

* Near-to-medium term growth opportunities:

* Transmission: Upcoming projects worth Rs265bn, majorly inter-state TBCB, are expected to be awarded in the next one year. With a target of 450GW of RE installed capacity by FY30, PGCIL expects the TBCB opportunity size to be high in medium term. Its planned capex for FY20-25 is Rs655bn, of which, Rs350bn has already been spent. For the Ladakh project, PGCIL has already submitted the DPR to the government (capital cost for the project is ~Rs210bn for 5GW without storage).

* Smart meters: PGCIL is targeting installation of 20mn meters in the next 3 years, at an investment of Rs100-120bn under TOTEX model. It will invest in end-to-end smart meter system and provide service to utilities on per meter per month basis.

* Distribution infrastructure augmentation: PGCIL is targeting another Rs100- 120bn investment in distribution space as per the Rs3trn revamped distribution sector scheme and is in discussion with several states.

* Other areas of opportunity include battery energy storage systems, data centres, telecom infrastructure (particularly ILD), consulting and international projects.

* Valuations and dividend outlook: We maintain our BUY rating and DCF-based target price of Rs225/sh. The stock is currently trading at FY24E P/E of 8.5x, P/B of 1.5x, with a dividend yield of 8.1%. Over FY22E-24E, we expect PGCIL to pay out >Rs40/sh as dividend (payout of 60-65% on cumulative consolidated EPS of Rs62.4/sh). Key risks: 1) Slower-than-expected pace of capitalisation; 2) inability to win projects under TBCB.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer