Valuations
We maintain our earnings estimates. However, we revise our SoTP-based
TP downwards to Rs 131 (vs. Rs 141) as we factor in lower core sustainable RoE
of 16.5% (vs. 17.5%) due to lower contribution from STOA going forward.
Maintain BUY.
Management Meet Key takeaways:
Capitalization in Q3 likely to be weak at Rs 25-30 bn
(H1FY13 at Rs 68 bn) due to prolonged monsoons. However, management guided for
increased pace of commissioning in Q4FY13 and expects FY13 at Rs 160-180 bn (Rs
141 bn in FY12). We have factored in capitalization of ~Rs 160 bn in FY13 and
FY14 each and hence no change in our estimates.
Equity dilution likely; current 12th plan capex target of Rs
1 tn may be revised upwards. According to the management, PGCIL is adequately
funded for its 12th plan target at execution pace of Rs 160-180 bn pa. However,
it expects an upward revision in 12th plan capex target driven by: (a) Green
Energy Corridors with an opportunity size of ~Rs 430 bn (may be allocated to
PGCIL or through PPP), (b) JVs with state transcos (opportunity size ~Rs 550
bn), (c) PPP (opportunity size ~Rs 250 bn).
Contribution from STOA would get marginalized: Post the
failure of northern grid, PGCIL has been de-emphasizing on sale of power
through STOA. Income from STOA contributed ~150 bps to FY12 core RoE of 17.5%.
Mgmt. expects income from STOA to remain at Rs 300 bn pa vs. FY12 at Rs 325 bn.
Capex till date at ~Rs 120 bn (H1FY13 at Rs 70 bn).
Management is confident on achieving FY13 capex target of Rs 200 bn. Of the Rs
1,000 bn capex targeted in the 12th plan, Rs 800 bn has already been ordered.
Our capex assumption for 12th plan is in line with the company.
Pace of award of contracts likely to slow down: Of the 12th
plan capex target of ~Rs 1,000 bn, PGCIL has placed orders for projects worth
~Rs 800 bn (~Rs 130 bn 9MFY13). The management expects to awards the balance
~Rs 200 bn worth of projects over the next one year. This implies slowdown in
orders for the T&D equipment manufacturers FY14 onwards. Notably, PGCIL
awarded projects worth ~Rs 250 bn in FY12 and Rs 180 bn in FY11.
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