Technically, PGC (CMP:144) has immediate strong positional support of around 140-137 zone & sustain above 142, immediate target may be 148-152-156. Consecutive closing above 152, it may scale 160-165 & 170-180 in the near term. Consecutive closing above 180, PGC may target 200 zone in the long term under bullish market scenerio.
On the flip side, consecutive closing below 137, PGC may fall to 131-134-127-122-119-115 zone in the near term under bear case scenerio.
Bottom Line: Technical Positional Trading Levels
| SL</>2 | FROM SLR | |||||||||
| POWERGRID | CMP | 144 | ||||||||
| T1 | T2 | T3 | T4 | T5 | T6 | T7 | SLR | |||
| Strong > | 140-142 | 148 | 152* | 156 | 160 | 165 | 170 | 180 | <137 | |
| Weak < | 137 | 131-134 | 127* | 122 | 119 | 115 | 108 | 101 | >140 | |
As par BG metrics: Current & Projected (FY:16-17) Median Techno/Funda Valuation may be around 156 & 175-190 under the current market conditions (stand alone basis).
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | LONG TERM | SHORT TERM | MEDIAN VALUE | 200-DEMA | 10-DEMA |
| POWERGRID | 9.65 | 65.87 | 18 | 155.93 | 157.06 | 156.49 | 139.97 | 142.01 |
| POWERGRID | 11.55 | 75.75 | 18 | 170.59 | 171.83 | 171.21 | 139.97 | 142.01 |
| POWERGRID | 13.95 | 87.25 | 18 | 187.47 | 188.84 | 188.15 | 139.97 | 142.01 |
Q4 results of PGC published yesterday is well above street estimates as far as headline numbers are concerned apparently on the back of strong commissioning of power projects. Its also recently raised Rs.3000 cr & Rs.435 cr (three months ago) by selling bonds in domestic market at an average yield of 8.40-8.30%. Interestingly, a big chunk of that (around Rs.1000 cr ) was taken by SBI & AXIS Bank. With expected cut in interest rate on June'2, bond yield may drift lower pushing bond prices higher, which may prompted them (SBI/AXIS bank) to book profit in secondary bond market (may be also positive for these banks).
For FY-16, PGC may raise around Rs.13000 cr by issuing bonds under private placement. The valuation of the stock is very reasonable for a business model which assured almost 15% RoE, strong growth visibility (expected "Shinning India" story as over 50% of power is being transmitted by it) and minimal operational costs. With equity dilution overhang removed (Govt. stake is now around 58% post 2013 FPO), going ahead, the stock will be driven by fundamentals and management guidance about pace of capex and commissioning of different projects for FY-16 along with future prospect in telecom & power consultancy business.
PGC also made a JV with RINL to make power transmission line towers recently. Also, there is news that Sri Lanka will take a decision for an undersea power cable project worth Rs.3000 cr with PGC shortly.
Further in a milestone move,the Govt. would hive off the central transmission utility (CITU) status of PGC which would facilitate competitive bidding of PGC into different power transmission projects without much fuss (otherwise, there may be a conflict of interest). In the CY:15-16, with further opening up of power transmission sector, different key projects worth around Rs.1 lakh cr is expected to be tendered. These will help to facilitate to take part in bidding actively for PGC without any controversy.
Due to high rated PSU (Govt backed image) status of PGC, funding & land acquisition is not an big issue for it for a project while other private sector competitors are lacking fresh investments/capex due to high NPA and reluctance of banks to extend them further funding apart from land issue. Till now, PGC is enjoying virtual monopoly & almost 99% market share in power transmission sector due to its expertise & market visibility. Its simply get project on nomination and sometimes by aggressive bidding to grab any project. For PGC, getting project is not a factor but timely commissioning may be an big issue as there are huge ques of pending projects.
Due to the proposed hiving of of CITU status, it may be brought to the same level playing ground with the private players, but its virtual monopoly may remains, at least for the next couple of years. There may be some concern on sustainability of PGC's RoE due to tariff based /cost plus mechanism, current bidding trends suggest that private companies are adopting more cautious approach towards bidding.
With muted growth in capital goods sector at this moment, industry is hoping for a revival due to expected infrastructure push by Govt, particularly in railways, smart cities & RE. There is a visible lack of demand from end-users in key core sector industries (power, cement and steel) and their capacity utilization remains well below their peak level. Thus broad based revival of stalled key projects are vital in the days ahead and that is expected only by H2/FY:15-16.
Upcoming power tariff regulations ( 2014-19 period) by CERC may act as an overhang for PGC to some extent, but not more than 3% hit on earnings (as expected by many analysts), even if more stringent draft regulations were to be implemented.
Being a low beta scrip, PGC may offer steady return to its investors in a longer period of time.
No comments:
Post a Comment