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PTC India – Stock For the Month of January 2018

Price:Rs. 119

View: Buy

PTC India Limited (“PTC” or “Company“) provides power trading solutions in India. The company is into:

(1) Power Business: Long and short term power trading activities including cross border power trading business. PTC caters to industrial and commercial customers and also provides consultancy and coal trading activities where its portfolio consists of investments in wind, thermal and hydro power projects.

(2) Investments Business: Financial assistance for power projects through its subsidiary PTC India Financial Services.

For FY 2017, total revenue from power segment stood at Rs. 14,124 Crores and from investments operations stood at Rs.1,187 Crores. If we consider in terms of contribution to profit before tax, 47.8% of its incomes comes from Power and 52.2% comes from investment segment.

Subsidiary holdings

65.0% stake in PTC India Financial Services Ltd
100.0% stake in PTC Energy Ltd
49.0% stake in Krishna Godavari Power Utilities Limited
37.0% in RS India Wind Energy Private Limited
26.0% in Varam Bio Energy Private Limited
48.0% in RS India Global Energy Limited

PTC India is the dominant player in the industry and has ~ 40.0% market share with over 500 industrial customers and supplier power to 22 state utilities. As an international trader, it supplies to Bhutan, Bangladesh and Nepal.

Break-up of revenue from PTC Energy business (464.5 MW): 

  • Renewable projects contributes 62% of the total investment portfolio.
  • 14% in thermal projects and
  • 3% in hydro projects.
  • 20% is in other ancillary power based projects.

PTC India

Promoters: Include NTPC, PowerGrid, PFC and NHPC.

Expect Strong Volume Growth Going Forward

Last 3 years have seen tremendous capacity addition in the power generation space. This augurs well for power trading companies.

power sector growth

In FY2018, PTC India is selected as a trader under the Ministry of Renewable Energy (MNRE) and Solar Energy Corporation of India (SECI) scheme for conducting competitive bidding for procurement of 1,000 MW power from wind power projects. Of which, PTC India has executed agreements for the supply of 400MW wind power to states of Bihar and Jharkhand in Q1FY2018. Further, cross-border trades in Bhutan and Bangladesh have been extended further, providing strong volume visibility.

While margin on traded power is likely to remain at 6 paise per unit growth in power trading volume will add to the overall profitability of the Company over the next few quarters.

Best Financial and Valuation Position Among Peers

In terms of Peer comparison, PTC stands third in terms of market cap and reports the best P/E ratio and net profit among the top five in the sector for financial year ended 31st March 2017. Table below states the financial comparison of the company with its peers:

 Standalone Price Market Cap

(Rs. Cr.)

Sales Turnover Net Profit Total Assets Profit Margins EPS P/E  Ratio
Adani Enterprise 130.65 14,369.02 8,595.01 221.64 10,530.40 3% 2.02 64.7
MMTC Ltd 59.1 5,910.00 11,708.36 57.06 1,874.26 0% 0.57 103.7
PTC India 121.95 3,609.82 14,074.83 290.87 3,757.68 2% 9.83 12.4
Swan Energy 138.85 3,391.51 336.68 1.68 624.86 0% 0.08 1735.6
STC India 159.2 955.2 8,048.83 -165.54 2,496.23 -2%  –  –

Current (as on 8th January 2018):

PTC India

Price Market Cap EPS P/E Ratio
Rs. 119 Rs. 3542 Cr. 10.7 11.16

Available Cheap Compared to its Historic Valuations

Price (Rs.) EPS (Rs.) P/E Dividend (Rs.) Dividend Yield
31-Mar-13 60.0 4.35 13.8 1.6 2.7%
31-Mar-14 66.8 8.49 7.9 2.0 3.0%
31-Mar-15 72.3 6.86 10.5 2.2 3.0%
31-Mar-16 64.8 7.89 8.2 2.5 3.9%
31-Mar-17 93.4 9.83 9.5 3.0 3.2%

PTC’s average PE multiple over the past 5 years is 9.98. The stock is currently trading at 11.16, despite the overall markets trading ~ 30% above their historic averages.

(in Rs. Crores) 31-Mar-17 31-Mar-16 31-Mar-15
Total equity 4,690 4,299 3,989
Total Debt 9,388 6,405 4,925
Debt – Equity ratio 2.0 1.5 1.2

Break Up of Assets and Borrowings

(in Rs. Crores) 31-Mar-17 31-Mar-1631-Mar-15 31-Mar-14 31-Mar-13
Long Term Borrowings 6,539 4,998 3,765 2,352 946
Short Term Borrowings 2,849 1,408 1,160 1,417 587
Total Borrowings 9,388 6,405 4,925 3,770 1,532
portfolio 46.6% 2,983
Tangible Assets 2,153 386 46 53 54
Growth in Tangible assets 457% 1,767

Whats Going Against the Stock

Low Plant Load Factor

Though the power generation and transmission capacities have been at the best levels of all time, but the slow industrial growth has adversely affected the overall growth in demand, thus creating a situation of excess supply and low demand. Ultimately leading to lower Plant Load Factors at most of the power plants. Industrial growth is the need of the hour to help the power based company’s progress and become profitable.

Also ReadPower Sector – Deep Value of Junk Buying

Rising Debt Levels with Not Much Improvement in Earnings

In comparison to the previous financial year, total borrowing of the company have grown by 46.6% owing to the purchase of plant and equipment’s during the financial year.

Total loan portfolio (loans given out) of the company has increased to Rs.9,702 crores on 31st March 2017 from Rs. 7,718 crores on 31st March 2016. While this shows that the Company is getting decent business, growth in loans remain a worry in subdued economic environement particularly when the macro data is not supportive and given that State Electricity Boards may take a much longer time to recover from their debt burden.