POWER GRID CORPORATION OF INDIA LTD  - Q2 FY18

Power Grid Corporation Of India reported strong double digit growth for the second quarter FY18 as Revenue/Income from operations and PAT moved at 16% & 14% respectively YOY. Income from Operations stood at Rs. 72528 Mn in Q2 FY18 compared to Rs. 62549 Mn in the same period previous year. Profit After Tax rose to Rs. 21410 Mn in the current quarter from Rs. 18720 Mn in the same quarter previous year. Earnings before Depreciation Interest & Tax jumped 15% YOY and stood at Rs. 67146 Mn in the current quarter against Rs. 58295 Mn same period previous year. Sequential growth was just 1% for revenues where as Net Profit and EBDITA jumped 4% & 5% respectively in the Q2 FY18. Other income grew at 6% from Rs 2253 Mn to Rs. 2397 Mn in the present September quarter. Operating cost for the quarter stood at Rs. 7780 Mn in the current quarter against Rs. 6507 Mn corresponding quarter previous year rising 20% YOY but declined 21% sequentially. As a result EBDITA Margin declined 62 basis points on yearly basis at 92.58% but jumped 334 basis points sequentially in the September quarter. Net Profit Margin stood at 29.52% declining 41 basis points YOY whereas quarterly jump was 94 basis points.  One basis point is 0.01%.  

The company has three main revenue segments, Transmission, Consultancy and Telecom. Transmission & Telecom segments performed well growing 16% & 21% respectively YOY. Sequential growth was reported at 2% & 10% respectively in the current quarter. Consultancy segment which gave strong performance in the previous June quarter declined 45% quarterly and 25% on yearly basis. Consultancy & Telecom business constitute 2% each of revenues whereas Transmission, core business of the company accounts for about 96% of total revenues. Power Grid Corporation of India transmits more than 45% of power generated in India. Though major revenue driver is transmission business, company is leveraging its electricity network topology to form optic fiber network for long distance telecommunication network. Power Grid Corporation Of India has further diversified its revenue basket by providing consultancy services to State owned Utilities, private utilities, government departments etc. In the present scenario with government reforms giving huge fillip to power & infrastructure, Electric Utilities sector stands to gain in the long run. Thus we are bullish on the stock for medium and long term with a target price of Rs. 310.       

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