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PTC India: A solid performance - Views on News from Equitymaster

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PTC India: A solid performance
Jun 2, 2014

PTC India declared its results for the quarter and year ended March 2014. The company's standalone revenues and profits were up by 30% YoY and 95% YoY respectively during FY14.

Performance summary
  • Standalone revenues increased by 30% YoY during the quarter led by a 14% YoY increase in volumes.
  • Operating margins expand by 1% YoY to 3.3% leading to a 86% YoY increase in operating profits during the quarter.
  • Profits rise at by 86% YoY on the back of a strong operating performance coupled with higher other income.
  • During FY13, the company's revenues and profits rise by 30% YoY and 95% YoY respectively. The traded volumes increased by 23% YoY in the full year. A strong operating performance coupled with higher other income led to a surge in profits during the year.
  • The company's board has recommended a dividend of Rs 2 per share (dividend yield of nearly 2.2%).

Standalone numbers
Rs (m) 4QFY13 4QFY14 Change FY13 FY14 Change
Trading volume (MU) 6,732 7,656 13.7% 28,597 35,130 22.8%
Net revenue 21,987 28,486 29.6% 88,569 115,107 30.0%
Expenditure 21,475 27,532 28.2% 86,869 111,978 28.9%
Operating profit 512 954 86.4% 1,700 3,129 84.1%
EBIDTA margin (%) 2.3% 3.3%   1.9% 2.7%  
Other Income 24 120 408.9% 119 543 358.2%
Depreciation 12 11 -8.7% 42 42 -0.2%
Interest 0 18   9 28 200.5%
Profit before tax 524 1,045 99.5% 1,767 3,603 103.9%
Exceptional items (0) 1   0 43  
Prior period expenses (6) (8) 18.8% 17 (4)  
Tax 147 349 138.1% 497 1,130 127.3%
Effective tax rate 28.0% 33.4%   28.1% 31.4%  
Profit after tax/ (loss) 370 689 86.1% 1,287 2,512 95.1%
Net profit margin (%) 1.7% 2.4%   1.5% 2.2%  
No. of shares (m)       295 296  
Diluted earnings per share (Rs)*         8.3  
Price to earnings ratio (x)*         10.8  
* (Trailing 12 month earnings)

What has driven performance in 4QFY14?
  • PTC's trading volumes increased by about 14% YoY during the quarter ended March 2014. Company's operating profits increased at a sharp pace of 86% YoY. However, when adjusted for the net surcharge figure of Rs 503 m, company's operating margins decline to 1.6% as compared to 1.9% in corresponding quarter last year. Company's margins dipped due to a higher share of the lower margin business (tolling volumes business' share declined on a YoY basis) in the quarter gone by. At the net level the company's profits were higher by 86% YoY (unadjusted figure).

  • During FY14, the company's revenues and profits were higher by 30% YoY and 95% YoY. Growth in revenues was largely led by a 23% YoY increase in volumes. Operating margins expanded to 2.7% from 1.9% in FY13, leading to operating profits to rise by 84% YoY. When adjusted for surcharge, profits are higher by about 23% YoY, with margins dipping by 0.1% YoY to 1.7% for the year.
What to expect?
At the current price of Rs 90, the stock of PTC India is trading at a multiple of 10.8 times its trailing twelve month earnings.

Going forward, the company's management expects the volumes to grow at a healthy pace as more capacities come on stream. While this will remain a positive, the long term concerns remain the same - poor financial health of SEBs leading to stretched working capital for the company.

Given the preference for power stocks in recent times, the stock of PTC has risen sharply in the recent past. It is up by 54% over one year and up by about 31% in the year till date. The company's debtor position has improved over the last year as the debtor days have come down, which is a positive sign. In FY14, the company received its pending receivables from the UP SEB which led to an improvement in working capital position. However, receivables from the Tamil Nadu SEB are still pending; for which the management is planning to take the legal route to resolve the same.

It may be noted that in March 2014, we had closed our position on PTC as the recommendation period had come to an end, but had nevertheless advised investors to hold on to the stock from a long term perspective.

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