“PGCIL has already commissioned assets worth Rs25bn in the first two months of FY13E and is likely to commission Rs15-20bn in June 2012. It is also targeting capitalization of Rs200bn+ for FY13. Huge investment approval over the last 2-3 years (~Rs360-400bn), huge capital WIP and regulatory support gives confidence on the improved capitalization trend. It also highlighted that renewable and subtransmission network for state building would provide additional opportunity in the XIIth plan. The company is also confident of winning projects even through ICB route due to inherent advantage of low funding cost and presence throughout the country.”
“PGCIL expects to award tenders worth ~Rs200-220bn for FY13. The ratio of segment will continue to remain the same with TL at ~45%, Transformers at ~10-15%, SS at ~15% and rest at ~25%. It also highlighted that prices of the 765KV transformer has seen an improvement of ~10% in the tenders/bids opened in the last two months. Also, participation of Chinese players in the transformer market has reduced in the recent tenders (large orders bagged recently were bid earlier). PGCIL has put additional conditions on the Chinese suppliers like 5-year warranty (normal being four years), additional bank guarantee, insisting in keeping extra spare than normal and linking payment to progress achieved in building factories in India.”
“The stock is trading at 1.5x P/B FY14E. We expect the stock to deliver earnings CAGR of 16.2% over FY12-17E, with core ROE of ~17.6% over the same period. We believe that the stock remains a safe play in the Indian utilities space. We maintain ‘BUY’ on the stock,” says Prabhudas Lilladher research report.
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