Date: 21st November, 2016

Q2 FY17 Results Update: Power Grid

Quarterly Highlights:

Company Details :
CMP (`)

183

State-run Navaratna Enterprise

Power Grid Corporation

POWERGRID

reported 32% rise in bottom-line at Rs 1,872 crore for the quarter

532898

ended September 30 on the back of higher income from

Power

operations. The fir m's revenues from transmission business rose to

Face Value (`)

10.00

Rs 6,100.6 crore during the July-September quarter from Rs

Book Value (`)

82.15

4,721.22 crore in the year-ago period.

NSE Symbol

BSE Code
Sector

RoE (%)

14.8

Market Cap (Cr)

Particulars

Q2 FY17

QoQ

` i n cr.

67,000

YoY

(% growth)

EPS - TTM (`):

13.16

Revenue

6255

2.2%

28.5%

P/E Ratio (x):

13.9

EBITDA

5604.1

3.4%

30.3%

Div Yield (%):

1.26

PAT

1872

3.9%

32%

52w High/Low

196.40/126.75

Shareholding Pattern

Key Analytical Ratios

Operating Margin

89.6%

88.5%

88.4%

Net Profit Margin

29.9%

29.4%

29.1%

Sept-16

June-16

Mar-16

Promoter

57.90

57.90

57.90

FII

35.82

35.39

36.46

Key highlights:

DII

13.13

13.88

14.10

Net revenue for the quarter stands at Rs 6255 cr, which has

Others

6.85

7.17

8.46

Total

100

100

100

Category

surged by 28.5% from the same quar ter of last year. This was

triggered by 29% YoY upsurge in revenues from Transmission

segment.
EBITDA has surged by 30.3% YoY to Rs 5604 cr and EBITDA

Key Financials

(` cr)

FY16

FY17E

FY18E

20,802

25575

32485

18345.5

22762

28587

Net Profit

6026.7

7348

9485

EPS

11.52

14.10

18.13

12.1

12.9

10.0

Revenue
EBITDA

PE (x)

margins have improved by 1200 bps YoY to 89.6%.

The firm's revenues from consultancy business was also higher

at Rs 154.21 crore in September quarter 2016-17 as against Rs
100.7 crore in the same quarter last fiscal.

A stable quarter with encouraging trends

Outlook:
The valuation of Power Grid is attractive and is expected to remain so as it is a secular defensive play and earnings

are unaffected despite economic downturn. The stock is trading at P/E(x) of 10 times of FY18E earnings of 18.1
which is lower than the trailing price to earnings ratio of 13.9 times. Maintain Hold/Accumulate with TP of INR 236
(discounting the stock to trade at 13 times of its FY18E EPS). Use corrections till 170-180 as good entry levels for
investors as long term growth prospects remains broadly intact for the stock due to high earnings visibility.

Key Rationale:

Strong Monopoly position: Power Grid's monopoly position is unchallengeable in the near-term. More than 45%

of power generated in India is transmitted through Power Grid. Its has a major transmission infrastructure
comprises 132,138 ckm of lines, 213 substations and 273,862 MVA of transformer capacity.

Strong Earnings visibility: Power Grid's manage ments optimism about future prospects of assets commissioning

with a capitalization target of about Rs.1.4 lakh crore in 3-4 years provides good visibility for earnings growth.

Fall in Interest Rate will also boost margins: Fall in interest rates is positive for Power Grid since it increases the
spread of their RoE over fixed income securities.

Diversification plans bodes well for Long-term earnings stability: Power Grid has major diversification plans to
start installing telecom towers along its transmission route, which will comple ment its optic-fibre cable network and
generate more revenue from services to telecom companies.

Least likely to get adversely impacted from the demonetisation move: Where sectors all across are impacted by
demonetisation, the power sector of India likely to remain unfazed by the effects of the notes ban issue as in any
power utilities or any distribution company (DISCOM) transactions are mainly done through electronics or cheques.

Key Risks:
Slowdown in Capex Cycle.
Govt owns 57.90% in Power Grid (Any Disinvestment plans can exert pressure on the stock price; however, it will

be a good opportunity for investors to enter)

Source: Company Reports / GSL Research

Power Grid: Story on Charts

Formation of Higher Highs & Higher Lows suggesting the stock is in Strong
Uptrend in Monthly (Larger) time frame. After two months of consolidation
it has given a fresh breakout and is expected to continue its upward
momentum in near term. Relative Comparison indicator is rising along with
price thus indicating Power Grid is outperforming Nifty. Strong Support
seen at 170 mark & Resistance at 235.

Prepared By: Guiness Research Team SEBI Registration (Research Analyst) Number:INH000003390
Source: Company Reports / GSL Research

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