Power Grid (PWGR)’s outcome highlights robust underlying numbers for its Transmission segment—implying ~18% y-o-y development. Reported S/A PAT was additional aided by larger other revenue, resulting in a 24% y-o-y rise. PWGR has won Rs 90-one hundred bn of awards in Q3, which is a positive, offered a declining order book. Valuations at 1.5x FY22e P/BV and ~7% FY22e dividend yield stay eye-catching for a organization with steady RoEs of ~17%. Maintain Buy, with DCF-based TP of Rs 248/sh.
Profit boosted by larger other revenue PWGR’s adj. S/A PAT was up 25.4% y/y to Rs 33 bn (16% ahead of our est.) on account of larger other revenue. Even adjusted for the identical, underlying transmission numbers are robust and imply ~18% y-o-y development, in our view. Other revenue was up 25.7% y-o-y to Rs 6.4 bn. This was led by larger late payment surcharge revenue and larger dividends from subsidiaries.
Profitability in the Telecom segment declined 16% y-o-y to Rs .9 bn, and for the Consultancy segment, it fell 38% y-o-y to Rs .4 bn. Capitalisation for the quarter stood at Rs 6.8 bn, whilst capex was at Rs 29.4 bn at the group level.
Management commentary highlights PWGR noted billing realisation enhanced and stood at 95.7% for 9M. Receivables also declined to 63 days at the finish of Q3 (v/s 69 days in Q2FY21 and 86 days in Q1FY21). The co. plans to lessen this to 50–55 days. PWGR has filed the draft challenge of InvIT and is awaiting SEBI clearance for the identical. The co. plans to launch the challenge by the finish of March.
Decline in capitalisation could effect development, but valuations eye-catching The current awarding of Rs 90–100 bn delivers some respite to a declining order book. While the awarding of transmission schemes beneath renewable integration presents a superior chance for PWGR to win new awards, our checks recommend continued challenges, which could lead to the deferment of awarding. If new orders do not continue to come in, a declining order book could effect the pace of development in profitability.
However, subsequently decrease capex (along with the removal of DDT) also implies prospective for larger dividends (FY22e div. yield of ~7%). Besides, the longer term image remains intact as investment in renewable power and development in energy demand would necessitate the will need for transmission performs.
Valuation at 1.5x FY22e P/BV remains eye-catching for a organization with steady RoEs of ~17% and does not capture any development prospective (EPS FY20–23e: 9% CAGR). Maintain Buy.