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Power Grid: Transmission led growth

May 26, 2010

Power Grid declared its FY10 results. The company has reported 9% YoY growth in sales while its net profits have grown by 6% YoY. Here is our analysis of the results.

Performance summary
  • Net sales grow by 25% YoY during FY10.
  • Operating margins expand to 82.3% during FY10, helped by lower staff costs (as percentage of sales).
  • Net profit grows at a slower pace (21% YoY) as compared to the growth in sales owing to lower other income and higher depreciation.
  • Recommends a final dividend of Re 1 per share. Total dividend (including interim dividend) for FY10 is Rs 1.5 per share (dividend yield of 1.5%).

Financial snapshot
(Rs m) FY09 FY10 Change
Net Sales 56,900 71,275 25.3%
Expenditure 11,036 12,581 14.0%
Operating profit (EBITDA) 45,864 58,694 28.0%
Operating profit margin (%) 80.6% 82.3%  
Other income 4,487 3,761 -16.2%
Depreciation 10,940 19,797 81.0%
Interest 16,423 15,432 -6.0%
Profit before tax 22,989 27,226 18.4%
Extraordinary income/(expense) (704) (963) 36.8%
Tax 5,380 5,854 8.8%
Profit after tax/(loss) 16,906 20,409 20.7%
Net profit margin (%) 29.7% 28.6%  
No. of shares (m) 4,207.7 4,207.7  
Diluted earnings per share (Rs) 4.0 4.9  
P/E ratio (x)   21.2  

What has driven performance in FY10?
  • The 25% YoY growth in PGCIL's FY10 sales was largely aided by a 23% YoY growth in the company's power transmission business. This forms around 94% of the company's total sales. The other business segments of consultancy and telecom grew by 27% and 9% respectively.

  • PGCIL's operating margins expanded to 82.3% during FY10. This was led by lower staff costs. These costs came down from 11.3% of sales in FY09 to 10.2% in FY10.

  • Despite a 28% YoY growth in operating profits, PGCIL managed a lower 21% YoY growth in its net profits during FY10. Profits were mainly impacted by lower other income (down 16% YoY) and higher depreciation (up 81% YoY).

What to expect?
At the current price of Rs 103, the stock is trading at a multiple of 15.3 times our estimated FY12 earnings. PGCIL's FY10 performance is almost in line with our expectations. We maintain our view on the stock from a 2-3 years perspective.

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Aug 12, 2020 (Close)


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