Result Update Rating matrix Rating : Hold Target : 68 Target Period : 12 months Potential Upside : 9% What s Changed? Target Changed from 72 to 68 EPS FY16E Changed from 6.4 to 6.5 EPS FY17E Changed from 6.8 to 6.4 Ratng Unchanged Quarterly Performance Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%) Revenue 3521 4212 (16) 3296 7 EBITDA 82 82 (1) 60 37 EBITDA (%) 2.3 2.0 36 bps 1.8 50 bps PAT 67 63 6 48 40 Key Financials Crore FY14 FY15 FY16E FY17E Net Sales 11,551 13,122 13,834 17,969 EBITDA 313 271 256 263 Net Profit 198 202 192 188 EPS ( ) 6.7 6.9 6.5 6.4 Valuation summary FY14 FY15 FY16E FY17E P/E 9.3 9.1 9.6 9.8 Target P/E 10.1 9.9 10.5 10.7 EV / EBITDA 4.2 4.8 5.1 5.0 P/BV 0.7 0.7 0.7 0.6 RoNW (%) 11.2 7.7 8.1 6.5 RoCE (%) 16.3 12.7 11.5 9.9 Stock data Particular Amount Market Capitalization ( Crore) 1,850.1 Total Debt (FY14) ( Crore) - Cash and Investments (FY15) ( Crore) 279.6 EV ( Crore) 1,570.5 52 week H/L ( ) 104.7/50.2 Equity capital ( Crore) 296.0 Face value 10 Price performance (%) 1M 3M 6M 12M PTC India 9.3 (9.7) (10.0) (30.3) Powergrid 0.6 (6.8) (8.8) (9.4) NTPC 8.9 (0.3) (11.6) (8.9) Research Analysts Chirag J Shah shah.chirag@icicisecurities.com Anuj Upadhyay anuj.upadhyay@icicisecurities.com Subdued demand hits volumes November 6, 2015 PTC India (POWTRA) 63 PTC s Q2FY16 trading volumes declined 1.4% YoY to 1254.6 crore units below I-direct estimate of 1470 crore unit, as short-term (ST) trading volumes grew at a subdued rate of 2.6% YoY, further aggravated by 9.5% YoY decline across long-term (ST) trading volumes Consequently, PTC reported a 16.4% YoY decline in energy sales to 3,521.0 crore due to lower volumes and tariff realisation. Net surcharge income and rebate came in at 21.4 crore in Q2FY16 vs. 18.8 crore in Q2FY15 The company, however, reported a higher trading margin of 4.7 paisa/unit vs. 4.4 paise/unit (ex rebate, surcharge & tolling trades) The company received 92 crore from the total outstanding dues of 220 crore from TNEB during the quarter Skewed business model PTC is India s leading power trading company with a market share of 30% in the trading business. Its trading volumes and PAT have grown at a CAGR of 15.7% and 15.3% to 3,714 crore and 202.3 crore, respectively, over FY10-15. The company operates at a very small margin of 4 7 paise per unit. This exposes the company to the risk of receivables for its shortterm trade (currently accounts for 50% of its total trading volume), thus impacting its working capital cycle. While the company has committed to long term PPA of over ~11 GW capacity, it has signed a sale agreement (PSA) for only ~7.4 GW till FY15. PTC aims to bring down this gap and increase its long term PPA share in total volumes from the current 40% to over 50% by FY17E, which would provide stable cash flow and, thus, minimise the risk of growing receivables. Sector continues to face key challenges The merchant market in India has got transformed from stable to becoming more erratic due to issues like increase in competition, slowing economy, SEB backdowns, etc. This led to a fall in merchant rates. Consequently, the share of a major player like PTC India witnessed a fall to 30% in FY15 from ~40% in FY10. As a result, many merchant players, including PTC India, are now focusing on shifting their existing portfolio more towards long term PPAs to ensure stable cash flow and earnings. Power traders excluded from participating in case I bids In a major setback, the Ministry of Power has revised the guidelines for Case I bidding, in which it has excluded power traders (like PTC) from participating in LT Power procurement bids. This would negatively impact PTC as the company is yet to sign a power sale agreement (PSA) for ~2,850 MW of capacity for which PPA has already been signed. Factoring in the same, we have revised our FY16E and FY17E estimates downward. Revise FY17E estimates downward; maintain HOLD The current short-term market volatility, transmission congestion in India and muted power demand have hit the company s ST trading volumes and, thus, its performance. Furthermore, the disallowing of power traders from participating in Case I bid is likely to raise concern on PTC s 2,850 MW capacity. Factoring in the same and the fact that the share of LT volumes is unlikely to increase to 50% over the next two to three years, we have lowered our margin estimates marginally lower for FY17E to 6.4 from 6.8 earlier. Consequently we have revised our target price downward to 68/share from our earlier target 72/share. We maintain our HOLD recommendation. ICICI Securities Ltd Retail Equity Research
Variance analysis Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) Comments Energy sales net 3,521.0 5,180.0 4,212.3 (16.4) 3,296.2 6.8 Fall in revenue was primarily due to a fall in long term traded volumes, which declined 9.5% YoY to 548.2 crore unit during the quarter due to poor offtake. Also, realisation declined ~15% YoY to 2.8/unit in Q2FY16 Other Income 0.0 0.0 0.0 0.0 0.0 0.0 Total Income 3,521.0 5,180.0 4,212.3 (16.4) 3,296.2 6.8 Power purchase cost 3,411.4 5,081.2 4,117.4 (17.1) 3,224.4 5.8 Decline was primarily due to lower power purchases from subdued demand Other expenses 22.2 9.6 8.6 159.9 6.6 235.1 Rise in other expenses was primarily due to 15.8 crore surcharge paid to the creditors during the quarter vs Nil payment in Q2FY15 Emplyee expense 5.8 6.0 3.9 46.2 5.4 7.3 Total expenses 3,439.4 5,096.8 4,129.9 (16.7) 3,236.4 6.3 EBITDA 81.6 83.2 82.4 (1.0) 59.8 36.5 Consequently, EBITDA declined during the quarter due to lower trading volumes However, margins improved due to increased share of LT trades EBITDA Margin (%) 2.3 1.6 2.0 36 bps 1.8 50 bps Depreciation 0.9 1.1 1.1 (17.1) 0.9 1.2 Interest 0.3 0.4 0.3 9.7 0.1 161.5 Other Income 48.9 10.0 44.2 10.7 11.4 329.2 PBT 129.3 91.7 125.2 3.3 70.2 84.2 Extraordinary expenses 33.7 0.0 33.0 2.2 0.0 - Extraordinary Income 0.0 0.0 0.0 0.0 0.0 0.0 Total Tax 28.6 22.9 29.2 (2.2) 22.3 28.6 Adj. PAT 66.9 68.8 63.0 6.3 47.9 39.7 Accordingly, PAT increased 6.3% YoY, due to higher surcharge and rebate income during the quarter. PAT was broadly in line with our estimate Key Metrics Short term volume 636.4 775.0 620.0 2.6 574.8 10.7 Decline was primarily due to transmission corridor constraints and lower demand across short term market Long term volume 548.2 650.0 606.0 (9.5) 383.8 42.8 Import from Bhutan 69.5 45.0 46.4 49.8 67.5 3.0 Change in estimates FY16E FY17E ( Crore) Old New % Change Old New % Change Comments Revenue 16,122.3 13,833.6 (14.2) 18,827.2 17,969.1 (4.6) Estimates have been revised downward to factor in volatility across shortterm market and fall in merchant realisations EBITDA 259.2 256.2 (1.2) 283.2 263.3 (7.0) Estimates for FY17E revised downward to factor in slight delay in commissioning of few LT PPA leading to drop in margin EBITDA Margin (%) 1.6 1.9 24 bps 1.5 1.5-4 bps PAT 189.0 191.7 1.4 200.7 187.9 (6.4) EPS ( ) 6.4 6.5 1.5 6.8 6.4 (6.3) Assumptions Current Earlier Comments FY14 FY15 FY16E FY17E FY16E FY17E LT Volume 1,223.8 1,467.4 1,582.0 1,936.8 1,713.8 2,070.2 Estimates revised to factor in H1FY16 result and management guidance ST Volume 2,147.0 2,080.5 2,181.2 2,329.6 2,226.8 2,377.4 Revised estimate for short-term and long term trade downward to factor in muted demand growth and high volatility in ST market Cross Border 140.7 164.5 202.0 222.2 177.5 195.3 ICICI Securities Ltd Retail Equity Research Page 2
Q2FY16 result and analyst meet highlights PTC traded 1254.6 crore units in Q2FY16 (down 1.4% YoY) vs. 1272 crore unit in Q2FY15, below our estimate of 1470 crore unit for Q2FY16 Out of total volumes traded, 50.7% of volumes came in from bilateral and exchange based trade. Volumes from LT PPAs accounted for 43.7% of total traded volumes while that of medium-term trades accounted for the balance 5.6% During the quarter, PTC received a net surcharge of 21.4 crore compared to 18.8 crore in Q2FY15 PTC recovered 92 crore from TNEB during the quarter. Thus, net outstanding dues from TNEB now stand at 128 crore. The management expects to recover the same by Q3FY16E The company will divest its stake in Teesta Urja Ltd to 6.89% from 10.5% to allow the Government of Sikkim to acquire a 51% stake in the project Margin per unit (excluding rebate surcharge & tolling converted to PPA) came in at 4.7 paise vs. 4.4 paise. PTC expects to sign 1.6 GW, 2.6 GW and 2.3 GW of PPA in FY16E, FY17E and FY18E, respectively, with a target to enhance LT trade proportion to 50% from the current proportion of ~40% in the overall trading volume PTC s debtor and creditor position declined to 2,726 crore and 1,694 crore, respectively, in Q2FY16 vs. 3,400 crore and 2,277 crore, respectively, in Q1FY16 Total PPAs signed by the company as on FY15 stood at ~11,000 MW while PSA signed totalled ~7,400 MW. The company is yet to sign PSA for the balance capacity Exhibit 1: Trend in volume traded (Crore unit) 1400 1200 1000 800 600 400 200 0 773 586 519 673 866 456 438 657 943 587 673 842 1082 824 766 1031 1272 777 633.1 1026.5 1254.6 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 During the quarter, the average realisation was at 2.8/unit while trading margins came in at 4.7 paisa/unit (excluding Simhapuri and Meenakshi). ICICI Securities Ltd Retail Equity Research Page 3
Exhibit 2: Movement in realisation and cost per unit of power traded ( ) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 3.3 3.7 3.6 3.6 3.7 3.3 3.2 2.9 2.8 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 0.06 0.05 0.04 0.03 0.02 0.01 0 Average Realisation Cost per Unit Trading Margin ( ) Exhibit 3: Composition of volumes in Q2FY16 Medium term 6% Short term 50% Long term & tolling 44% ICICI Securities Ltd Retail Equity Research Page 4
Company Analysis Long term PPA to account for 50% of total traded volume by FY18E PTC India, a GoI initiative, is a pioneer in starting a power market in India. The company has maintained its leadership position in power trading since inception. However, growing competition with lower entry barrier, has led to a decline in PTC s market share from 50% to 30% at present. PTC has also been authorised by the Government of India to trade electricity with Bhutan and Nepal. Its trading volumes and PAT have grown at a CAGR of 15.7% and 15.3% to 3,714 crore and 202.3 crore, respectively, over FY10-15. It operates at a very small margin of 4 paise per unit for short-term (ST) trade and 7 paise per unit for long term (LT) trade. The company aims to bring down this gap and increase its LT PPA share in total volumes from the current ~35-40% to over 50% by FY18E. We have now revised our trading volume and margin estimates downward to factor in volatile short term market and lower trading margin in the current scenario. We now expect volume and PAT to grow at a CAGR of 12.1% and 10.1% to 4,509 crore units and 187.9 crore, respectively, over FY13-17E. Exhibit 4: Volume, PAT trend, going ahead (Crore units) 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 4509 3973 3714 3513 2860 2448 2433 1823 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E Volumes PAT 250 200 150 100 50 0 ( crore) Exhibit 5: Strategic investment made by PTC India Company PTC Stake (%) Amount invested by PTC ( crore) PTC India Financial Services 60.0 267.6 PTC Energy 100.0 55 Athena Energy Ventures 18.0 27.0 Teesta Urja 11.0 156 Krishna Godavari Power Utilities 34.7 130.2 Chenab Valley Projects 2.0 0 Total 635.3 ICICI Securities Ltd Retail Equity Research Page 5
Upcoming LT trading capacity to bring stability to cash flow PTC has till date signed PPA totalling 11 GW capacity with various power producers and IPPs. However, it has signed a PSA only for ~7.4 GW till FY15. The company aims to bring down this gap and increase its long term PPA share in total volumes from the current annual rate of 40% to over 50% by FY18E. This would provide stable cash flows and, thus, minimise the risk of growing receivables. Exhibit 6: Commencement of LT capacity Year No. of projects Capacity (MW) Thermal Hydro Wind Total FY13 3 9 1 13 2600 FY14 4 4 600 FY15 5 1 6 1400 FY16E 5 1 6 3500 FY17E 6 6 3100 Total 23 11 1 35 11200 Volatile ST market, adverse bidding guideline to impact RoE, going ahead The Ministry of Power has revised guidelines for Case I bidding, in which it has excluded power traders (like PTC) from participating in LT power procurement bids. This would negatively impact PTC as the company is yet to sign a power sale agreement (PSA) for ~2,850 MW of capacity for which PPA has already been signed. Accordingly, the company will now have to enter into medium term or short-term agreement for these capacities. Unlike LT trade, margins across ST and medium-term trade hover around 4-5 paise compared to LT trade, which enjoys 7-8 paise margin. Accordingly, the diversion of trade towards ST is likely to negatively impact the company s earnings, going ahead. Furthermore, volatility across ST market continues to impact the volume growth. Accordingly we expect, RoE to decline to 6.5% each in FY17E. Exhibit 7: RoE, RoCE trend in FY13-17E (%) 18 16 14 12 10 8 6 4 2 0 16.3 12.7 11.5 9.9 8.7 11.2 7.7 8.1 6.2 6.5 FY13 FY14 FY15 FY16E FY17E RoE RoCE ICICI Securities Ltd Retail Equity Research Page 6
Outlook and valuation Volume growth during FY15 (up 5.7% YoY) was driven by commissioning of LT PPA during the quarter. While the management has indicated at maintaining the current trend in ST volumes, it expects contribution from LT trade to increase from current average ~35% (on an annual basis) to over 50% by FY18E with the commencement of its committed projects. With a higher share of LT trade, going ahead, the company is likely to witness more stability in its future cash flow, which would also enhance its margin as LT trade offers higher trading margin of ~7 paise/kwhr vs. ~4 paise/kwhr on ST trades. Furthermore, with the recovery of dues from UP discom, PTC s debtor position has improved significantly. This would ease the pressure on its working capital requirement. However, the current short-term market volatility, transmission congestion in India and muted growth across power demand has impacted the company s H1FY15 performances. We believe the above concerns will take longer to get corrected. Furthermore, the disallowing of power traders from participating in Case I bid is likely to raise concern on PTC s 2,850 MW capacity. Factoring in the same and the fact that the share of LT volumes is unlikely to increase to 50% over next two to three years we have lowered our margin estimates marginally lower for FY17E to 6.4 from 6.8 earlier. Consequently we have revised our target price downward to 68/share from our earlier target 72/share. We maintain our HOLD recommendation. Exhibit 8: Valuation snapshot Particulars Basis of Valuation Value per share Core Business 5x FY16E EPS 32 PFS 30% Holding Co. discount on Market Cap 36 Total Valuation 68 CMP 63 Upside/(Downside) % 8.7 ICICI Securities Ltd Retail Equity Research Page 7
Company snapshot 160 140 120 100 80 Target Price 8 60 40 20 0 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Mar-11 PTC Financial Services, in which PTC India holds 77% stake, launched IPO and got listed on BSE & NSE. The company raised 357 crore from the issue by diluting 17% of its stake. Currently, PTC India holds 60% in the entity Nov-11 PTC stops power supply to UP and TN SEB as receivables reach 1200 crore due to non-payment by SEBs due to poor financial health. PTC reported debt of 425 crore during Q2FY12 vs. negative net debt balance in FY11 owing to stretched receivables Dec-11 PTC enters into PPA with developers for the 1200 MW Teesta Urja project in which the company holds 11% stake Jun-12 Power tolling agreement with Simhadri Power commences with volumes traded during Q1FY13 totalling ~12 crore units ie 2% of total traded volume Sep-12 GoI approves a 1.9 lakh crore debt restructuring plan for SEBs, to bail out loss making SEBs Sep-12 The company reports highest quarterly trading volume of 943 crore units during Q2FY13 Mar-13 UP Cabinet approves acceptance of the Centre's condition for 15000 crore bailout package for its loss making SEB Jun-13 Management decides to exit the tolling business and convert the same into long term PPA. While the decision will provide a cushion against volatile fuel prices and Oct-13 UPPCL clears entire dues worth 778 crore, as the state benefited from the Centre's bailout package. Furthermore, Q2FY14 witnessed highest ever trading volume Dec-13 PTC Financials divests its entire 16.76% stake held in Meenakshi Energy Pvt Ltd (MEPL) at 210 crore. MEPL is implementing 1,000 MW coal-based plant in AP, of which 300 MW is operational. Furthermore, with dues from UP and TN SEB being recovered, PTC resumed power supply to these states Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Life Insurance Corporation of India 30-Sep-15 10.13 30.0 Change (m) 2 NHPC, Ltd. 30-Sep-15 4.05 12.0 Change (m) 3 NTPC Ltd 30-Sep-15 4.05 12.0 Change (m) 4 Power Finance Corporation Ltd 30-Sep-15 4.05 12.0 Change (m) 5 Power Grid Corporation of India Ltd 30-Sep-15 4.05 12.0 Change (m) 6 Reliance Capital Asset Management Ltd. 30-Sep-15 3.84 11.4 Change (m) 7 Norges Bank Investment Management (NBIM) 30-Sep-15 3.83 11.3 Change (m) 8 Damodar Valley Corporation, Ltd. 30-Sep-15 3.38 10.0 Change (m) 9 Kuwait Investment Authority 30-Sep-15 3.19 9.4 Change (m) 10 Birla Sun Life Asset Management Company Ltd. 30-Sep-15 2.92 8.7 Change (m) Source: Reuters, ICICIdirect.com Research Recent Activity (in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Promoter 16.22 16.22 16.22 16.22 16.22 FII 24.46 25.64 28.02 28.75 30.27 DII 37.74 36.64 33.16 30.47 27.48 Others 21.58 21.50 22.60 24.56 26.03 Investor name Investor name Investor name Value Shares Investor name Value Shares Lazard Asset Management, L.L.C. 6.79m 7.47m Dimensional Fund Advisors, L.P. -5.22m -5.74m British Columbia Investment Management Corp. 2.00m 1.85m HDFC Standard Life Insurance Company Limited -3.87m -3.58m Wellington Management Company, LLP 1.65m 1.10m IDFC Asset Management Company Private Limited -3.10m -3.41m Platinum Investment Management Ltd. 1.42m 0.90m Max Life Insurance Co. Ltd. -2.27m -1.75m Caisse de Depot et Placement du Quebec 0.58m 0.64m DSP BlackRock Investment Managers Pvt. Ltd. -1.59m -1.61m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 8
Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15 FY16E FY17E Total operating Income 11550.6 13121.7 13833.6 17969.1 Growth (%) 29.8 13.6 5.4 29.9 Raw Material Expenses 11209.0 12823.7 13591.0 17723.5 Employee Expenses 13.7 14.4 15.2 15.9 Administrative Expenses 0.0 0.0 0.0 0.0 Other expenses 94.4 107.8 55.8 61.1 Total Operating Expenditure 11317.1 12945.9 13661.9 17800.5 EBITDA 312.9 270.8 256.2 263.3 Growth (%) 84.0 (13.4) (5.4) 2.8 Depreciation 4.2 4.2 5.7 6.0 Interest 0.0 0.0 0.0 0.0 Other Income 54.4 67.8 76.3 34.0 PBT 363.1 334.5 326.7 291.3 Others 0.0 0.0 0.0 1.0 Total Tax 113.0 98.2 96.9 99.5 APAT 197.5 202.3 191.7 187.9 Growth (%) 54.5 2.4 (5.3) (2.0) EPS ( ) 6.7 6.9 6.5 6.4 Cash flow statement Crore (Year-end March) FY14 FY15 FY16E FY17E Profit after Tax 247.3 202.3 225.4 187.9 Add: Depreciation 4.2 4.2 5.7 6.0 (Inc)/dec in Current Assets (30.4) (533.5) 125.4 (569.4) Inc/(dec) in CL and Provisions 10.8 350.0 151.8 372.9 Others 0.0 0.0 0.0 0.0 CF from operating activities 231.8 22.9 508.3 (2.6) (Inc)/dec in Investments (35.4) (25.0) (35.0) (35.0) (Inc)/dec in Fixed Assets (0.2) 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 CF from investing activities (35.5) (25.0) (35.0) (35.0) Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0 Inc/(dec) in loan funds 0.0 0.0 0.0 0.0 Dividend paid & dividend tax (54.4) (66.2) (66.2) (66.2) Inc/(dec) in Sec. premium 0.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 CF from financing activities (54.4) (66.2) (66.2) (66.2) Net Cash flow 141.9 (68.3) 407.2 (103.8) Opening Cash 353.5 544.7 476.4 883.5 Closing Cash 544.7 476.4 883.5 779.7 Balance sheet Crore (Year-end March) FY14 FY15 FY16E FY17E Liabilities Equity Capital 296.0 296.0 296.0 296.0 Reserve and Surplus 2200.9 2337.1 2495.3 2616.0 Total Shareholders funds 2496.9 2633.1 2791.3 2912.0 Total Debt 0.0 0.0 0.0 0.0 Total Liabilities 2496.9 2644.5 2803.8 2925.5 Assets Gross Block 62.5 62.7 62.8 63.0 Less: Acc Depreciation 39.2 44.2 44.2 44.2 Net Block 30.1 25.9 20.2 14.2 Capital WIP 0.0 0.0 0.0 0.0 Total Fixed Assets 30.1 25.9 20.2 14.2 Investments 959.9 984.9 1019.9 1054.9 Inventory 0.0 0.0 1.0 1.0 Debtors 2085.7 2616.3 2490.0 3054.8 Loans and Advances 82.6 82.6 82.6 82.6 Other Current Assets 12.0 14.9 15.7 20.4 Cash 544.7 476.4 883.5 779.7 Total Current Assets 2724.9 3190.2 3472.9 3938.5 Creditors 1134.3 1411.0 1562.7 1935.7 Provisions 72.1 145.4 145.4 145.4 Total Current Liabilities 1206.4 1556.4 1708.2 2081.1 Net Current Assets 1518.5 1633.8 1764.7 1857.4 Others Assets 0.0 0.0 1.0 2.0 Application of Funds 2665.0 2644.5 2803.8 2925.5. Key ratios (Year-end March) FY14 FY15 FY16E FY17E Per share data ( ) EPS 6.7 6.9 6.5 6.4 Cash EPS 6.8 7.0 6.7 6.6 BV 84.4 89.0 94.3 98.4 DPS 1.8 2.0 2.0 2.0 Cash Per Share 18.4 16.1 29.8 26.3 Operating Ratios (%) EBITDA Margin 2.7 2.1 1.8 1.5 PBT / Total Operating income 3.1 2.5 2.3 1.6 PAT Margin 1.0 2.0 3.0 4.0 Inventory days 1.0 2.0 3.0 4.0 Debtor days 65.2 72.0 64.8 61.2 Creditor days 34.9 37.8 39.6 37.8 Return Ratios (%) RoE 11.2 7.7 8.1 6.5 RoCE 16.3 12.7 11.5 9.9 ROA 9.9 7.7 8.0 6.4 Valuation Ratios (x) P/E 9.3 9.1 9.6 9.8 EV / EBITDA 4.2 4.8 5.1 5.0 EV / Net Sales 0.1 0.1 0.1 0.1 Market Cap / Sales 0.2 0.1 0.1 0.1 Price to Book Value 0.7 0.7 0.7 0.6 Solvency Ratios Debt/EBITDA 0.0 0.0 0.0 0.0 Debt / Equity 0.0 0.0 0.0 0.0 Quick Ratio 1.8 1.7 1.5 1.5 ICICI Securities Ltd Retail Equity Research Page 9
ICICIdirect.com coverage universe (Utilities) Sector / Company CMP Target Rating M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) ( ) TP( ) Rating ( Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E JP Power(JAIHYD) 7 10.6 Hold 2,174 0.1 1.9 NA 54.4 3.8 NA 10.2 6.6 NA 5.3 7.9 NA 0.6 8.2 NA NHPC (NHPC) 18 22 Buy 19,761 1.9 2.0 2.3 9.4 8.9 7.9 8.4 8.2 7.0 7.7 7.8 8.8 7.6 7.7 8.2 Power Grid (POWGRI) 131 173 Buy 68,534 9.5 12.2 14.4 13.8 10.7 9.1 11.3 10.4 9.2 7.8 7.8 8.6 13.1 14.9 15.4 PTC India (POWTRA) 63 71 Hold 1,850 6.9 6.4 6.8 9.1 9.8 9.2 5.7 5.9 5.4 12.7 10.2 10.4 7.7 6.9 6.9 CESC (CESC) 555 668 Buy 7,363 22.6 44.5 66.0 24.6 12.5 8.4 8.1 7.8 5.9 9.4 9.4 12.1 3.1 8.6 11.4 Tata Power (TATPOW) 69 74 Hold 18,527 0.6 4.3 6.2 110.4 16.0 11.1 7.5 6.0 5.0 11.3 13.4 15.9 1.3 8.8 12.4 ICICI Securities Ltd Retail Equity Research Page 10
RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 11
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Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Sanjay Chirag Shah PGDBM and Anuj Upadhyay MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Chirag Shah PGDBM and Anuj Upadhyay MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. 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