10 August 2015
1QFY16 Results Update | Sector:
Utilities
Power Grid Corporation
BSE SENSEX
28,102
Bloomberg
Equity Shares (m)
M.Cap.(INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val,INRm/Vol‘000
Free float (%)
S&P CNX
8,526
PWGR IN
5,231.6
639.4/10.0
159/127
-2/-1/-6
475/3,370
42.1
CMP: INR138
n
TP: INR167 (+21)
Buy
Operational performance in line; capitalization muted
1QFY16 performance in line:
PGCIL reported 1QFY16 revenue at INR47.2b (up
20% YoY; estimate of INR46.5b) and EBIDTA of INR41.4b (up 23% YoY; in line with
estimate of INR40b). Core performance was driven by transmission division EBIT at
INR27b, up 21% YoY and in line with our estimate of INR27.6b. Reported PBT at
INR17.3b, too, was in line with estimate of INR16.6b. However, higher-than-
estimated contribution from consultancy and telecom divisions was negated by
lower-than-estimated other income. Reported PAT stood at INR13.7b, up 15% YoY
and in line with estimate of INR13.3b.
Performance of consultancy and telecom divisions strong:
Consultancy division
revenue stood at INR900m, up 47% YoY and ahead of our estimate of INR750m.
EBIT for the division stood strong at INR620m (up 1.24x YoY), entailing margin of
69%, v/s our estimate of INR394m (margin of 53%). Telecom division revenue, too,
grew a robust 45% YoY to INR977m v/s estimate of INR700m. EBIT margin was a
key surprise at 43%, leading to EBIT of INR421m (up 3.5x YoY) v/s estimate of
INR154m (margin of 22%). Telecom division EBIT margin was the highest ever in a
quarter since FY07.
Capitalization muted, capex strong:
Capitalization for 1QFY16 stood at INR45b,
down 8% YoY and lower than estimate of INR60b as commissioning of one of the
large lines was delayed to 2QFY16. Capex for the quarter was robust at INR64b, up
10% YoY and higher than estimate of INR50b.
Valuation and view:
We expect PGCIL to report net profit of INR57.3b in FY16 (up
13% YoY) and INR70b in FY17 (up 21% YoY). The stock trades at P/E of 10.4x and
P/BV of 1.6x on FY17E basis. Maintain
Buy
with a DCF-based TP of INR167/sh.
Financials & Valuation (INR Billion)
Y/E MAR
Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2015 2016E 2017E
171.8 200.4 236.5
147.5 172.5 204.4
50.7
9.7
13.1
73.0
13.9
8.0
14.3
1.9
57.3
11.0
13.1
80.1
14.3
8.3
12.6
1.7
69.8
13.3
21.8
88.8
15.8
9.0
10.4
1.6
n
n
Estimate change
n
TP change
Rating change
Nalin Bhatt
(NalinBhatt@MotilalOswal.com); +91 22 3982 5429
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

Power Grid Corporation
1QFY16 operational performance in-line
n
n
n
n
For 1QFY16, PGCIL reported revenues of INR47.2b, up 20% YoY and broadly in-
line with our estimate of INR46.5b.
EBIDTA for the quarter stood at INR41.4b (up 23% YoY), in-line with estimate.
Core performance is driven by transmission division EBIT at INR27b, up 21% YoY,
in-line with our estimate of INR27.6b.
Reported PBT at INR17.3b too was in-line with estimate of INR16.6b. However,
higher than estimated contribution from Consultancy (INR267m) and Telecom
division (INR227m) was negated by lower than estimated other income
(INR566m).
Reported PAT thus stood at INR13.7b, up 15% YoY, in-line with estimate of
INR13.3b.
Exhibit 1: Transmission division reported robust PBT growth
EBIT (INR b)
Chg (% YoY)
15 17
9
8
8
10
9
9
10
19
21 20 21
24
26 27
24 24
21 22 22
120%
100%
80%
60%
40%
20%
0%
-20%
Source: MOSL, Company
Consultancy and Telecom division performance robust
n
n
Consultancy division revenue stood at INR900m, up 47% YoY and ahead of our
estimate of INR750m. EBIT for the division stood strong at INR620m (up 1.24x
YoY), entailing margin of 69%, vs our estimate of EBIT of INR394m (margin of
53%).
Telecom division revenue too grew robust by 45% YoY to INR977m vs estimate
of INR700m. EBIT margin was key surprise at 43% leading to EBIT of INR421m
(up 3.5x YoY), vs estimate of INR154m (margin of 22%). Telecom division EBIT
margin is highest ever in a quarter since FY07.
Exhibit 3: Telecom division surprise positively (INR m)
1,050
975
900
825
750
675
600
525
450
375
300
Revenue
EBIT
550
425
300
175
50
-75
-200
Exhibit 2: Consultancy division performance better (INR m)
57
50 55
64
39
19
EBIT
68
49
61
59 56
76
EBIT margin (%)
68 69
71
52
47
45
31 34
52
10 August 2015
2

Power Grid Corporation
Source: MOSL, Company
Capitalisation muted, capex robust
n
n
Capitalization for 1QFY16 stood at INR45b, down 8% YoY and lower than
estimate of INR60b as commissioning of one of the large line is delayed to
2QFY16.
Capex for the quarter was robust at INR64b, up 10% YoY, and higher than
estimate of INR50b.
Exhibit 4: Capitalisation muted in 1Q, expect pick-up in 2HFY16E (INR b)
Source: Company, MOSL
Exhibit 5: Capex intensity continues (INR b)
Source: MOSL, Company
10 August 2015
3

Power Grid Corporation
Valuation and view
n
n
n
Near term growth visibility strong:
PWGR’s targeted capex of INR1.1t in 12th
Five Year Plan (FY13-17) is up 2x from 11th Plan, is on track with ~95% of the
projects already under implementation.
Capitalization to remain robust leading to core income growth:
We factor
capex of INR225b pa over FY15-17E and capitalization of INR240b each in
FY16/17E. Successful execution will drive 18% CAGR in Regulated Asset Base
over FY15-FY17E and 20% CAGR in regulated earnings.
Maintain Buy:
We expect PGCIL to report net profit of INR57.3b in FY16E (up
13% YoY) and INR70b in FY17E (up 21% YoY). Stock trades at PER of 10.4x and
P/BV of 1.6x on FY17E basis. Maintain BUY with DCF based TP of INR167/sh.
Exhibit 6: PWGR trading at 5-year average PER
40
30
20
10
0
12.8
15.4
11.8
P/E (x)
5 Yrs Avg(x)
7 Yrs Avg(x)
Exhibit 7: P/B too closer to 5-year average
5.0
4.2
3.4
2.6
1.8
1.0
1.8
2.1
16.0
14.5
1.7
13.0
P/B (x)
7 Yrs Avg(x)
5 Yrs Avg(x)
ROE (%)
17.5
Source: MOSL
10 August 2015
4

Power Grid Corporation
Operating Metrics (Quarterly)
Exhibit 8: Key
operating
metrics (Quarterly)
Particulars
1QFY13
Capex
30,070
Gr (% YoY)
54.8%
Capitalisation
41,000
Gr (% YoY)
411.2%
Segment Revenue
-Transmission
28,166
- Consultancy
612
-ULDC/RLDC
0
-Telecom
571
Total Income
29,349
Profit Before Tax
- Transmission
-Consultancy
-ULDC/RLDC
-Telecom
Profit Before Tax
2QFY13
41,000
53.7%
26,600
-18.3%
30,403
678
0
611
31,692
3QFY13
55,360
35.4%
25,860
16.1%
33,123
666
0
615
34,404
4QFY13
73,570
-19.2%
78,540
0.5%
32,798
1,225
0
640
34,663
1QFY14
50,000
66.3%
29,500
-28.0%
34,354
961
0
758
36,072
2QFY14
58,000
41.5%
20,500
-22.9%
37,610
2,173
0
768
40,551
3QFY14
57,000
3.0%
30,500
17.9%
35,270
1,477
0
677
37,424
4QFY14
55,000
-25.2%
63,500
-19.1%
38,043
1,716
0
680
40,440
1QFY15
58,440
16.9%
48,780
65.4%
38,570
612
0
675
39,856
2QFY15
48,560
-16.3%
47,220
130.3%
40,868
617
0
674
42,160
3QFY15 4QFY15
50,000 67,560
-12.3% 22.8%
71,000 50,610
132.8% -20.3%
42,401
1,105
0
777
44,282
45,586
1,544
0
884
48,013
1QFY16
64,000
9.5%
45,000
-7.7%
45,747
900
0
977
47,623
17,018
321
0
177
17,517
18,802
401
0
183
19,386
20,732
373
0
221
21,326
19,981
237
0
179
20,398
20,723
445
0
285
21,453
23,716
675
0
311
24,701
20,991
505
0
196
21,692
22,259
1,224
0
146
23,628
22,311
277
0
1
22,589
23,585
323
0
102
24,009
24,102
751
0
209
25,062
25,794
1,178
0
251
27,223
26,990
620
0
421
28,031
10 August 2015
5

Power Grid Corporation
Operating Metrics (Yearly)
Exhibit 9:
Key
assumptions
Capex
Gr (% YoY)
Capitalisation
Gr (% YoY)
RAB (INR b)
Gr (% YoY)
Financials
Revenue
EBIDTA
Margin (%)
Adj. PAT
Gr (% YoY)
- Trans. Div
- Telecom
- Consultancy
Core RoE (%)
FY10
106
36
113
FY11
137
28.9%
74
103.9%
136
19.5%
83.9
69.4
82.8%
25.4
10.3%
19.1
0.3
1.3
15.4%
FY12
178
30.4%
141
91.5%
178
31.2%
101.6
85.1
83.7%
33.2
30.6%
27.0
0.5
1.3
17.3%
FY13
200
12.4%
172
22.0%
215
20.9%
127.6
109.4
85.7%
41.4
24.6%
35.4
0.6
1.1
18.0%
FY14
220
10.0%
159
-7.6%
263
22.2%
152.3
129.6
85.1%
44.8
8.2%
38.9
0.8
2.3
16.3%
FY15
225
2.1%
218
36.9%
328
24.9%
171.8
147.5
85.9%
50.7
13.1%
42.6
0.5
1.6
14.4%
FY16E
225
0.2%
250
14.9%
403
22.9%
200.4
172.5
86.1%
57.3
13.1%
50.4
0.6
1.9
13.8%
INR b
FY17E
225
0.0%
240
-4.0%
475
17.9%
236.5
204.4
86.4%
69.8
21.8%
62.6
0.7
2.2
14.3%
71.3
58.9
82.7%
23.0
18.7
0.1
1.2
10 August 2015
6

Power Grid Corporation
Story in charts
Exhibit 10: Capex momentum remains strong (INR b)
Exhibit 11: Capitalization expected to inch up (INR b)
218
178
200 220
225 225 225
74
141
41
60
37
36
172 159
250 240
25 26 24 32 41 63 66 81
106
137
Source: MOSL, Company
Source: MOSL, Company
Exhibit 12: RAB growth expected to be robust (INR b)
RAB to grew 2x
from FY13-17
Exhibit 13: Consultancy/Telecom growth muted (INR m)
Consultancy work
% of Trans Business Profits
3,000 8.8
8.5
7.6
2,000
6.5
3.8
1,000
0
-1,000
Telecom division
8.2
7.9 6.8 6.2
10%
8%
5.2
5%
3%
0%
76
83
101 113 136 178 215 263 328 403 475
Source: MOSL, Company
Source: MOSL, Company
Exhibit 14: Robust PAT growth driven by strong core growth
(INR b)
Exhibit 15: Return ratios too look up (%)
45
Net profit
25
16
9
11
16
20
17
10
25
33
41
31
Gr (% YoY)
25
9
45
13
13
22
10.6
70
8.6
14.0
13.0
11.7
9.3
8.6
9.3
9.2
9.3
8.7
8.0
8.3
9.0
15.1
RoE
16.6
13.6
14.8
14.8
13.9 14.3
RoCE
15.8
23
51
57
Source: MOSL, Company
Source: MOSL, Company
10 August 2015
7

Power Grid Corporation
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Cost of Goods Sold
Staff Cost
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
Extra-ord. Item (as reported)
PBT
Tax
Rate (%)
Reported PAT
Extra-ordinary items
Adjusted PAT
Change (%)
Balance Sheet
Y/E March
Equity Share Capital
Reserves
Net Worth
Loans
Deferred tax liability
Advance against dep
Deferred revenue & Grant in Aid
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Deferred Tax Asset
Curr. Assets
Inventory
Debtors
Cash & Bank Balance
Other Current Assets
Loans & Advances
Current Liab. & Prov.
Net Current Assets
Application of Funds
E: MOSL Estimates
(INR Million)
2017E
236,463
18.0
13,538
18,545
204,380
86.4
72,388
50,196
5,460
0
87,257
17,458
20.0
69,799
0
69,799
21.8
(INR Million)
2017E
52,316
412,019
464,335
1,109,940
24,722
0
0
1,598,996
1,672,647
417,704
1,254,943
370,739
7,437
31,328
137,225
9,492
28,019
22,311
23,942
53,461
202,676
-65,451
1,598,996
2010
71,275
8.3
7,267
5,074
58,933
82.7
19,797
15,432
3,759
-963
26,263
5,854
22.3
20,409
2,621
23,031
16.7
2011
83,887
17.7
7,459
6,989
69,439
82.8
21,994
16,254
7,111
-44
38,258
11,278
29.5
26,979
-1,569
25,411
10.3
2012
101,643
21.2
8,430
8,100
85,113
83.7
25,725
19,432
6,207
-187
45,976
13,427
29.2
32,550
649
33,199
30.6
2013
127,579
25.5
8,864
9,350
109,364
85.7
33,519
25,352
5,709
247
56,449
14,104
25.0
42,345
-986
41,359
24.6
2014
152,303
19.4
9,417
13,323
129,563
85.1
39,957
31,675
4,911
-205
62,638
17,663
28.2
44,974
-205
45,179
9.2
2015
171,772
12.8
10,237
14,023
147,513
85.9
50,854
39,793
6,028
0
62,894
13,102
20.8
49,792
864
50,655
12.1
2016E
200,366
16.6
11,772
16,126
172,468
86.1
60,966
45,346
5,459
0
71,615
14,329
20.0
57,286
0
57,286
13.1
2010
42,088
117,331
159,383
344,168
7,035
22,136
1,988
534,711
432,023
111,410
320,613
204,222
14,532
0
96,273
3,449
22,149
32,776
4,875
33,024
100,929
-4,656
534,711
2011
46,297
167,373
213,670
386,658
11,467
21,645
1,713
635,154
504,508
131,278
373,230
239,429
13,984
0
130,573
3,815
11,140
36,801
22,292
56,526
122,062
8,511
635,154
2012
46,297
188,581
234,878
507,692
16,009
21,438
6,325
786,341
633,873
157,250
476,623
281,835
12,845
13,167
117,614
4,403
14,975
23,369
14,460
60,407
115,742
1,872
786,341
2013
46,297
216,097
262,395
650,763
19,592
20,950
16,226
969,925
2014
52,316
292,280
344,596
794,902
24,430
20,181
24,994
1,209,103
2015
52,316
329,350
381,666
905,758
24,722
0
47,629
1,359,775
2016E
52,316
366,615
418,931
1,003,561
24,722
0
0
1,447,213
806,001
965,037 1,182,647 1,432,647
191,994
233,496
284,350
345,316
614,006
731,541
898,297 1,087,331
348,235
494,767
527,807
385,739
11,475
9,987
9,264
7,387
17,163
24,906
28,415
29,836
120,456
134,690
119,226
125,155
5,515
7,124
7,178
8,254
14,341
15,785
21,187
24,364
16,620
44,175
20,630
16,612
18,396
17,356
22,789
23,358
65,584
50,250
47,443
52,567
141,411
186,788
223,234
188,236
-20,955
-52,098
-104,008
-63,081
969,925 1,209,103 1,359,775 1,447,213
634,143
750,727
885,129
10 August 2015
8

Power Grid Corporation
Financials and Valuations
Ratios
Y/E March
Basic (INR)
Consolidated EPS
Growth (%)
Cash EPS
Book Value
DPS
Eq. Div.Payout (incl. Div. Tax.)
Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2010
5.5
16.7
10.2
37.9
1.5
36.1
25.2
13.5
15.1
12.5
3.6
1.1
15.1
8.6
113
0.2
2.2
2011
5.5
0.3
10.2
46.2
1.8
34.9
25.2
13.5
14.2
11.8
3.0
1.3
13.6
9.3
48
0.2
1.8
2012
7.2
30.6
12.7
50.7
2.1
34.8
19.3
10.9
13.2
11.1
2.7
1.5
14.8
9.2
54
0.2
2.2
2013
8.9
24.6
16.2
56.7
2.8
35.0
15.5
8.5
11.6
10.0
2.4
2.0
16.6
9.3
41
0.2
2.5
2014
8.6
-4.2
16.3
65.9
2.6
35.1
16.1
8.5
11.4
9.7
2.1
1.9
14.8
8.7
38
0.2
2.3
2015E
9.7
13.1
19.4
73.0
2.9
35.6
14.3
7.1
10.9
9.4
1.9
2.1
13.9
8.0
45
0.2
2.4
2016E
11.0
13.1
22.6
80.1
3.3
35.0
12.6
6.1
9.9
8.5
1.7
2.4
14.3
8.3
44
0.2
2.4
2017E
13.3
21.8
27.2
88.8
4.0
35.0
10.4
5.1
8.9
7.7
1.6
2.9
15.8
9.0
43
0.2
2.4
Cash Flow Statement
Y/E March
PBT before EO Items
Add : Depreciation
Interest
Less : Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
EO Income
CF frm Oper. incl. EO Items
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
(Inc)/Dec in Net Worth
(Inc)/Dec in Debt
Less : Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2010
27,226
19,797
15,432
5,854
13,141
69,742
-963
68,779
0
-100,487
-31,708
1,396
-99,091
163
61,438
15,432
7,370
38,799
8,488
24,289
32,776
2011
38,302
21,994
16,254
11,278
-9,143
56,129
-44
56,085
0
-109,818
-53,734
549
-109,270
36,733
46,156
16,254
9,426
57,209
4,024
32,776
36,801
2012
46,163
25,725
19,432
13,427
-6,792
71,102
-187
70,916
0
-171,525
-100,610
1,139
-170,386
-13,170
129,980
19,432
11,339
86,039
-13,432
36,801
23,369
0
2013
56,202
33,519
25,352
14,104
16,077
117,047
247
117,294
0
-237,303
-120,009
1,370
-235,933
-4,007
156,067
25,352
14,817
111,890
-6,749
23,369
16,620
0
2014E
62,843
39,957
31,675
17,663
58,698
175,510
-205
175,305
0
-304,023
-128,718
1,488
-302,535
45,249
156,976
31,675
15,765
154,786
27,556
16,620
44,175
0
2015E
62,894
50,854
39,793
13,102
28,365
168,804
0
168,804
0
-250,650
-81,846
723
-249,927
1,472
113,603
39,793
17,704
57,578
-23,545
44,175
20,630
0
2016E
71,615
60,966
45,346
14,329
-44,946
118,653
0
118,653
0
-107,932
10,720
1,877
-106,055
-1,421
50,173
45,346
20,022
-16,615
-4,018
20,630
16,612
0
(INR Million)
2017E
87,257
72,388
50,196
17,458
8,070
200,452
0
200,452
0
-225,000
-24,548
-50
-225,050
-1,492
106,379
50,196
24,395
30,297
5,699
16,612
22,311
0
10 August 2015
9

Power Grid Corporation
Corporate profile: Power Grid Corporation
Company description
PGCIL is a central transmission utility (CTU) with a
mini-navratna status, which owns and operates
most of India's interstate and inter-regional power
transmission system. It has been identified as a
nodal agency by the Government to set up inter-
regional transmission capacity.
Exhibit 16: Sensex rebased
165
155
145
135
125
Aug-14
Nov-14
Feb-15
May-15
Aug-15
Power Grid Corpn
Sensex - Rebased
Exhibit 17: Shareholding pattern (%)
Jun-15
Promoter
DII
FII
Others
57.9
8.3
26.5
7.4
Mar-15
57.9
7.9
27.6
6.6
Jun-14
57.9
8.2
26.9
7.1
Exhibit 18: Top holders
Holder Name
Europacific Growth Fund
LIC of India
New World Fund INC
ICICI Prudential Life Insurance Company Ltd
Comgest Growth PLC A/C Comgest Growth Emerging
% Holding
4.8
2.7
1.7
1.5
1.3
Note: FII Includes depository receipts
Exhibit 19: Top management
Name
R N Nayak
Designation
Chairman & Managing Director
Exhibit 20: Directors
Name
R N Nayak
R K Gupta*
Mahesh Shah*
K Ramalingam*
Ajay Kumar Mittal*
R Krishnamoorthy
Name
R T Agarwal
R P Sasmal
R P Singh
I S Jha
Jyoti Arora
Pradeep Kumar
*Independent
Exhibit 21: Auditors
Name
Chatterjee & Co
S K Mehta & Co
Sagar & Associates
K G Goyal & Associates
S C Mohanthy & Associates
Type
Statutory
Statutory
Statutory
Cost Auditor
Cost Auditor
Exhibit 22: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
MOSL
forecast
11.0
13.3
Consensus
forecast
11.4
13.2
Variation
(%)
-3.7
0.8
10 August 2015
10

Power Grid Corporation
NOTES
10 August 2015
11

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Power Grid Corporation
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Analyst ownership of the stock
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POWER GRID CORPORATION
No
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