Recommendation From Power Sector

HERE IS WHY
Strong Financials
Robust Order Book
Attractive Valuations

Power Grid Corporation of India (PGCIL) is a transmission company engaged in the power transmission business with responsibility for planning, implementation, operation and maintenance of inter-state transmission system and operation of national and regional load despatch centres. It owns and operates over 129,350 circuit kilometers of EHV transmission lines. The company has approximately 210 sub-stations. Its Smart Grid enables real time monitoring and control of power system.

Powergrid Warora Transmission, a wholly-owned subsidiary of PGCIL, secured through Tariff Based Competitive Bidding (TBCB), has successfully completed the element - LILO of existing Seoni-Bina 765kV S/C line at Gadarwara STPP. The company started commercial operation on November 30, 2016.

On the half yearly front, PGCIL’s revenue increased 29.5 per cent to Rs.12,375 crore in H1FY17 as compared to the same period in previous financial year. On the segmental revenue front, the company has earned 93.1 per cent from transmission charges, 2.15 per cent from consultancy income services, 1.89 per cent from telecom and remaining 2.86 per centfrom others in H1FY17. Its EBITDA too rose 30.67 per cent to Rs.11,024 crore in H1FY17 on a yearly basis.

PGCIL’s net profit also increased 32.45 per cent to Rs.3,674 crore in H1FY17 on a YoY basis. PGCIL has commissioned cumulative projects worth Rs.11,000 crore in FY17 till date. The company has received investment approvals of Rs.26,948 crore in H1FY17.It has also bagged contracts worth Rs.18,094 crore in H1FY17. 

PGCIL’s topline has increased 16.27 per cent CAGR over the last five financial years ending with FY16. The company’s EBITDA too rose 16.25 per cent CAGR during FY12-FY16. Its bottomline also increased 15.12 per cent CAGR in the last five financial years. 

PGCIL’s revenue rose 11.33 per cent to Rs.27,780 crore in FY16 as compared to previous financial year. The company’s EBITDA increased 11.66 per cent to Rs.27,467 crore in FY16 on yearly basis. Its net profit also rose 5.09 per cent to Rs.6,184 crore in FY16 on a year-on-year basis. PGCIL has ROE and ROCE of 14.9 per cent and 10.1 per cent respectively in FY16.

On the valuation front, the share price of PGCIL is trading at a PE multiple of 13.86x as compared to industry PE of 13.13x. Meanwhile, the company has attractive PE multiple as compared to peers such as Torrent Power (15.36x), NTPC (13.19x) and Adani Power (55.24x). The company’s stock has given a dividend yield of 1.27 per cent.