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Power Grid: Better margins aid bottomline
Aug 7, 2010

Power Grid has declared its 1QFY11 results. The company has reported 17% YoY growth in sales while net profits have grown by 29% YoY. Here is our analysis of the results.

Performance summary
  • Net sales grow by 17% YoY during 1QFY11.
  • Operating margins expand to 84.1%, helped by lower staff costs (as percentage of sales).
  • Net profit grows at a faster pace (29% YoY) as compared to the growth in sales owing to improved margins and higher other income.


Financial snapshot
(Rs m) 1QFY10 1QFY11 Change
Net Sales 17,142 19,991 16.6%
Expenditure 2,931 3,180 8.5%
Operating profit (EBITDA) 14,211 16,811 18.3%
Operating profit margin (%) 82.9% 84.1%  
Other income 1,001 1,506 50.4%
Depreciation 4,695 5,024 7.0%
Interest 3,729 4,049 8.6%
Profit before tax 6,788 9,244 36.2%
Extraordinary income/(expense) 14      12 -15.5%
Tax 1,336 2,224 66.4%
Profit after tax/(loss) 5,466 7,032 28.6%
Net profit margin (%) 31.9% 35.2%  
No. of shares (m)        4,207.7          4,207.7  
Diluted earnings per share (Rs)      5.2  
P/E ratio (x)   19.1  

What has driven performance in 1QFY11?
  • PGCIL's grew its sales by 17% YoY during 1QFY11. This was largely aided by a 14% YoY growth in the company's power transmission business. This forms around 92% of the company's total sales. The other business segments of consultancy and telecom grew by 60% and 11% respectively.

  • PGCIL's operating margins expanded to 84.1% during 1QFY11. This was led by lower staff costs. These costs came down to 10% of sales, from 11.4% in 1QFY10.

  • On the back of improvement in operating margins as well as higher other income (up 50% YoY), PGCIL grew its net profit by 29% YoY during the quarter.

What to expect?
At the current price of Rs 100, the stock is trading at a multiple of 12.8 times our estimated FY13 earnings. We maintain our view on the stock from a 2-3 years perspective.

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