Power Grid Net Up By 37 Per Cent

At a time when the power generating companies are reeling under a severe burden of under-recoveries , low tariffs and financing woes, the state-owned transmission utility Power Grid Corporation has come out with excellent results. The company for the quarter ended December, 31 2011 reported 20 per cent rise in its topline to Rs 2,466 crore while its net profit has increased by 37 per cent to Rs 809 crore.

The income from its core business i.e. the transmission business was up by 18 per cent to Rs 2,254 crore while that from its consultancy business zoomed up by 31 per cent to Rs 73 crore. The telecom business income was also up by 27 per cent to Rs 53 crore on a YOY basis. Its short-term open access income, on the other hand, declined by 88 per cent to Rs 5 crore which we believe is due to the declined power generation in the country on the back of coal shortage.

The company’s employee expenses as a percentage of sales declined by 100 basis points while its O&M expenses remained in line compared to the corresponding quarter in the last fiscal. Its EBITDA margins have improved by 107 basis points to 85.24 per cent in the December quarter.  These margins are the highest in the last two years.

Its total interest expenses rose by 16 per cent to Rs 473 crore on a YOY basis but have declined by 15 per cent sequentially compared to the last quarter i.e. September 2011 where it stood at Rs 555 crore. The total taxes paid in the quarter are slightly less compared to the same in the December quarter last fiscal. Its reported net profit of Rs 809 crore indicates growth in the business.

In the last two years we have seen a trend where a company is usually seen reporting a good set of numbers. Hence we expect the company to maintain this growth momentum in the next quarter as well.

On a nine-month basis the company has reported 12 per cent rise in its topline to Rs 6,177 crore and a 14 per cent rise in net to Rs 2,223 crore. With many new generation projects commissioned in this fiscal, we are hopeful that Power Grid will see good rise in its revenues. The company is also partially shielded by the under-tariffs, fuel prices, etc. Besides, we believe that its financial position is very strong. The company also has also been awarding projects and has a whopping capex of Rs 1 lakh crore which will ensure capital expansion.

In the last analyst meet, the company’s management were seen to be very confident and indicated towards using new technologies of surveillance of the transmission towers as well of the cables which will improve its margins. We believe that Power Grid is almost behaving in a monopolistic nature in the country. Even for the new projects coming into the country the company has formed a joint venture with the private utilities, indicating awareness of the change in the power generation business. With rise in its margins as well as its net profit we would advise our readers to enter the counter.