Thanks to a sharp rise in transmission volume.
According to Maybank Kim Eng, Power Grid Corp. of India's 3Q profit growth of 31% YoY/11% QoQ was 9% above analysts' estimate. A sharp rise in transmission volume, led by commencement of new grids, propelled the profit increase. PWGR started the Biswanath-Agra transmission line worth INR75b.
"We raise our transmission volume forecast for FY16/17, driven by record project commissioning in 9MFY16. We increase our EPS forecast for FY16 by 4% and for FY17 by 6%. We revise our DCF-based TP to INR170. Stock is trading at P/BV of 1.6x FY17F vs. historic avg 1.9x," it said in a report.
In 3Q, PWGR commissioned projects worth INR172b (+140% YoY). This supported the significant increase in transmission volume. Maybank Kim Eng forecasts 22% volume growth for FY16 and 20% for FY17 led by commissioning of 15 new grids worth INR210b.
"3Q profit of INR16b was the best ever for any quarter. 9M forms 72% of our revised earnings forecast of INR60.4b. We expect 4Q profit to rise 20% YoY to INR16.5b as the company will commence new grids worth INR210bn by March. PWGR will invest INR210b in FY17 for capacity expansions. FY17 profit would rise 19%, driving ROE improvement of 60bp to 15.7%."
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