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PTC India: Strong end to year - Views on News from Equitymaster

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PTC India: Strong end to year

May 24, 2013

PTC India declared its results for the quarter and year ended March 2013. The company's standalone revenues and profits were up by 16% YoY and 7% YoY respectively during FY13. Here is our analysis of the results.

Performance summary
  • Standalone revenues increase by 52% YoY during the quarter led by a 54% YoY increase in volumes.
  • Operating margins expand by 0.1% YoY to 2.3% leading to a 58% YoY increase in operating profits during the quarter.
  • Profits rise at a slower pace of 23% YoY on the back of lower other income and a higher tax outgo during the quarter.
  • During FY13, the company's revenues and profits rise by 16% YoY and 7% YoY respectively. The volumes traded rose by 17.6% YoY in the full year. Slower rise in profits largely due to a sharp decline in other income.
  • The company's board has recommended dividend of Rs 1.60 per share (dividend yield of nearly 2.8%).

Standalone numbers...
Rs (m) 4QFY12 4QFY13 Change FY12 FY13 Change
Trading volume (MU) 4,380 6,732 53.7% 24,325 28,597 17.6%
Net revenue 14,438 21,987 52.3% 76,503 88,569 15.8%
Expenditure 14,114 21,475 52.2% 75,049 86,869 15.7%
Operating profit 324 512 58.2% 1,454 1,700 16.9%
EBIDTA margin (%) 2.2% 2.3%   1.9% 1.9%  
Other Income 148 23 -84.2% 505 119 -76.5%
Depreciation 11 11 2.1% 45 42 -5.8%
Interest 64 0 -99.6% 260 9 -96.5%
Profit before tax 397 524 31.8% 1,654 1,767 6.8%
Exceptional items 3 (0)   3 0 -90.2%
Prior period expenses 1 6 424.6% 1 (17)  
Tax 98 147 48.9% 452 497 10.0%
Effective tax rate 24.8% 28.0%   27.3% 28.1%  
Profit after tax/ (loss) 301 370 23.3% 1,204 1,287 7.0%
Net profit margin (%) 2.1% 1.7%   1.6% 1.5%  
No. of shares (m)       295 296  
Diluted earnings per share (Rs)*         4.3  
Price to earnings ratio (x)*         13.3  
* (Trailing 12 month earnings)

What has driven performance in 4QFY13?
  • PTC's power trading volumes grew by about 54% YoY in 4QFY13. This led to a revenue growth of 52.3% YoY. Volumes from the tolling business stood at 304.08 m units during the quarter (about 4.5% of total volumes). At the operating level, the company's margins expanded by about 0.1% to 2.3% which led to a slightly faster increase in operating profits. The higher margins of the tolling business influenced the overall margins to a certain extent during the quarter. It may be noted that the tolling business began contributing to revenues during FY13 only.

  • PTC's net profits increased by 23% YoY. Lower other income was the key reason for the profits before tax to grow (32% YoY) at a lesser pace as compared to the rise in operating profits. Had it not been for the lower expenses, the profits would have fallen all the more. As compared to the corresponding quarter last year, interest expenses in 4QFY13 were negligible on back of the company's working capital position improving thereby allowing it to maintain zero net debt. It may be recalled that higher net working capital requirement necessitated additional working capital loans in FY12.

  • As of March 31, 2013, the total power purchase agreements (PPAs) signed by the company were 14,402 MW. The cumulative power sale agreements (PSAs) signed stood at 5,595 MW.

  • During full year FY13, the company's revenues were higher by about 16% YoY on the back of a 17.6% YoY increase in volumes. Of the total volumes traded 25,597 m units, tolling volumes stood close to 1 bn units. PTC's profits increased at a slower pace of 7% YoY mainly on account lf lower other income, which declined by 77% YoY.

What to expect?
At the current price of Rs 57, the stock is trading at a multiple of 0.5 times our estimated FY15 book value per share. A key concern surrounding the company has been related to collections from state electricity boards. As per PTC's management, barring the UP and Tamil Nadu discoms, collections have improved significantly post the restructuring plan announced earlier this year. As regards to these two discoms, the company expects the situation to improve over the next few months. Receivables at the end of the year stood at Rs 21.4 bn as compared to Rs 25.8 bn which was the position at the end of the earlier year. As a result, the company's cash increased to Rs 3.5 bn as compared to Rs 458 m at the end of FY12.

Going forward, PTC's management expects the volumes to rise by about 13-15% next year. This it expects so on account of increasing short term trading volumes (given the deficit situation), coupled with new capacities coming on stream. The company also expects existing capacities to increase generation on account of increased coal availability as Coal India has announced higher production volume targets (6-7%).

In view of the scenario improving, we suggest investors to continue to hold on to the stock at current levels.

We would like to remind you that within the overall exposure to equities, you must ensure that you broadly follow our suggested asset allocation and that no single stock comprises more than 5% of your portfolio.

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