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PTC: Strong overall performance

Feb 13, 2009

Performance summary
  • Topline grows by 189% YoY in 3QFY09, 59% YoY in 9mFY09. Strong growth in traded volumes helps growth in topline.
  • Operating margins remain stable during both the periods under consideration.
  • Other income shoots up by almost 320% YoY during the quarter, aiding a net profit growth of 283% YoY.

Financial performance: A snapshot
(Rs m) 3QFY08 3QFY09 Change 9mFY08 9mFY09 Change
Units traded (m) 2,075 3,797 83.0% 8,666 11,643 34.4%
Sales 7,338 21,168 188.5% 33,595 53,512 59.3%
Expenditure 7,326 21,141 188.6% 33,431 53,285 59.4%
Operating profit (EBDITA) 12 27 124.5% 165 226 37.5%
Operating profit margin (%) 0.2% 0.1%   0.5% 0.4%  
Other income 75 312 317.9% 235 768 226.6%
Depreciation 3 16 395.4% 9 47 398.7%
Interest 6 7 14.9% 15 24 55.7%
Profit before tax 77 316 308.7% 375 924 146.2%
Tax 15 79 412.4% 80 171 114.6%
Profit after tax/(loss) 62 237 282.8% 296 754 154.7%
Net profit margin (%) 0.8% 1.1%   0.9% 1.4%  
No. of shares       150.0 227.1  
Diluted earnings per share (Rs)*         4.2  
P/E ratio (x)*         15.6  
* On a trailing 12-months basis

What has driven performance in 3QFY09?
  • PTC grew its sales by 189% YoY during 3QFY09. This was aided by a strong 83% YoY growth in traded volumes, which stood at 3,797 m units during the quarter. The realisations on these volumes averaged Rs 5.6 per unit, up 58% YoY.

  • PTC’s operating margins remained stable during both 3QFY09 and 9mFY09. The company’s margins per traded unit increased from 3.4 paisa to 3.6 paisa. Readers would do well to note that, through its order in January 2006, the CERC fixed the trading margin at 4 paise/kWh for electricity traders who have been given licenses for engaging in interstate trading of electricity. The effect of fixation of trading margins at 4 paise/kWh has been clearly visible in PTC’s numbers over the past many quarters. We believe that the move to fix margins could be construed as a sign of excessive regulation in a sector that is yet to take off. At 4 paise/kWh, the margin works out to only 1% of the average cost of traded power at around Rs 4/kWh. This is much lower than around 3% margins on cost of power traded that is supposed to cover all risks, and does not factor in the risks associated with third party transactions.

  • PTC recorded a stupendous 283% YoY growth in net profits during 3QFY09. This was on the back of strong growth in sales and substantially higher other income.

What to expect?
At the current price of Rs 65, the stock is trading at a multiple of 15.6 times its trailing 12-months earnings. Given the nine-month performance, we will be revising upwards our future estimates for the company. Overall, we maintain our positive view on the stock from a 2 to 3 years perspective.

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Jun 1, 2020 (Close)


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