Thursday, June 7, 2012


Balance sheet woes receding…

PTC India reported a volume decline of 16% YoY, which was below our expectations of 13% YoY growth. Hence, the volumes traded in Q4FY12 stood at 4.4 billion units (BUs) (I-direct estimate: 5.9 BUs). Muted volume growth in Q4FY12 led to a flattish volume growth performance in FY12 at 24.3 BUs. Calculated trading margins for the quarter stood at 8.7 paisa owing to recovery of surcharge from Bihar and Jharkhand SEBs to the tune of | 15 crore. Otherwise, normalised trading margins came in at 4.7 paisa for Q4FY12.

 Volatility in short term markets leads to flattish FY12
Short-term volumes declined 28% YoY in Q4FY12, which led to 16 decline in the overall traded volumes for Q4FY12. However, a pick-up in long term volumes (up 43% YoY) provides encouraging signs that volatility in volumes, going ahead, will be limited as PTC expects 580 MW and 3164 MW worth of long term arrangements to fructify in FY13E and FY14E, respectively. Though this will lead to some decline in margins, it will ensure steady volume growth for the company. We have built in volumes of 28.8 BUs and 36.5 BUs in FY13E and FY14E, respectively.

■ Uptick in payments from SEB to gradually improve perception risk UPPCL and TNEB owe ~| 1900 crore to PTC. Out of these, PTC has received | 150 crore from | 750 crore due from TNEB while the remainder will be paid by Q1FY13, as per the management. Even payments from UPPCL are expected to commence in H1FY13. This, we believe, will lead to a decline in the perception risk that PTC was facing with respect to non payment of dues. Also, during Q4FY12, PTC has repaid all working capital loans.

Commencement of payments from SEBs will improve sentiments and outlook towards the stock as clearing of loans will lead to interest cost savings in FY13E and FY14E. Hence, we have revised the earnings by 22% and 25% for FY13E and FY14E, respectively. We have revised our target price to | 68 per share (from | 62 earlier).