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PTC: Lower power prices impact sales - Views on News from Equitymaster
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PTC: Lower power prices impact sales
Feb 3, 2010

Performance summary
  • Sales fall by 20% YoY during 3QFY10. This is despite a 17% YoY increase in trading volumes and is largely owing to the sharp fall in realisations per unit traded.
  • Operating margins spike to 0.6% during the quarter, from 0.1% in 3QFY09. Lower power purchase costs (as percentage of sales) lead to this improvement in operating margins.
  • Net profits fall by 33% YoY during the quarter, largely impacted by the drop in sales and lower other income.
  • For 9mFY10, sales and profits grow by 22% YoY and 6% YoY respectively.


Financial performance: A snapshot
(Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
Units traded (m) 3,797 4,444 17.0% 11,643 15,036 29.1%
Sales 21,168 16,975 -19.8% 53,512 65,273 22.0%
Expenditure 21,141 16,871 -20.2% 53,285 64,726 21.5%
Operating profit (EBDITA) 27 103 280.0% 226 548 141.8%
Operating profit margin (%) 0.1% 0.6%   0.4% 0.8%  
Other income 312 143 -54.0% 768 598 -22.1%
Depreciation 16 14 -11.2% 47 41 -11.6%
Interest 7 2 -66.2% 24 3 -86.8%
Profit before tax 316 230 -27.1% 924 1,101 19.2%
Extraordinary income/(expense) - 0   2 0  
Tax 79 72 -9.3% 171 300 75.7%
Profit after tax/(loss) 237 159 -32.9% 756 802 6.1%
Net profit margin (%) 1.1% 0.9%   1.4% 1.2%  
No. of shares       227.4 294.5  
Diluted earnings per share (Rs)*         3.2  
P/E ratio (x)*         32.4  
* On a trailing 12-months basis

What has driven performance in 3QFY10?
  • PTC saw its sales fall by 20% YoY during 3QFY10. This was despite a 17% YoY growth in trading volumes. The company traded 4,444 m units (MU) of power during the quarter as against 3,797 MU in 3QFY09. However, given the company had sourced power during the quarter at an average rate of Rs 3.78 per unit (down 32% YoY), and it had to pass on the same to the buyers, realisations were impacted. This was the biggest reason for the drop in sales during the quarter. The company’s average selling price for its traded power stood at Rs 3.82 per unit, which was lower by 31% YoY.

  • PTC’s operating margins improved to 0.6% in 3QFY10. This was a direct result of the improvement in trading margins that stood at 4.1 paisa per unit in 3QFY10, as compared to 3.6 paisa in 3QFY09. PTC’s power purchase costs declined from 99.4% of sales in 3QFY09 to 98.9% in 3QFY10, thereby aiding the margins. The management sees a further improvement in margins in the future as the company sees a higher share of long term trading (that has higher margins as compared to short term trading) in its total business.

  • Despite a strong 280% YoY growth in operating profits, PTC’s net profits saw a 33% YoY decline during 3QFY10. This was largely owing to lower other income, which declined by 54% YoY during the quarter.

What to expect?
At the current price of Rs 105, the stock is trading at a multiple of 18.6 times our estimated FY12 earnings. This makes it reasonably valued. PTC’s 9mFY10 numbers have come in at a lower run rate than what it requires to meet our full year FY10 estimates. As such, we will have to revise our numbers downwards. We shall soon update our research report on the company, incorporating this revision.

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