Mr. R.N. Nayak, CMD accompanied by senior management of PGCIL
addressed the analyst meet yesterday. The key takeaway was that the
momentum in capitalization seen in Sep-q has continued in the month of
October. So far in FY12, Rs51bn of transmission projects have been
commissioned. Of this ~Rs32.3bn was added to gross block in Sep-q and
~Rs10bn in October so far. Management did not give guidance on
capitalization but they seemed confident that the pick-up is likely to sustain.
We do not see any downside to our Rs98bn capitalization estimate in FY12.
For details on Sep-q results and our OW investment view on the stock see our
last note: "PAT adjusted for notional FX loss ahead of consensus, pick up in
capitalization on expected lines”
Capex guidance for FY12 maintained. So far in FY12 PGCIL has
incurred Rs49bn of capex. Management is confident of a pick-up in balance
5months of the fiscal to achieve full-year target of Rs176bn and thus meet
11th Plan (FY08-12) target of Rs550bn. In our view, the capex guidance
appears challenging and we have maintained est. of Rs140bn capex in
FY12.
Contract awards by PGCIL have gone up sharply in Oct-11: According
to management, so far in current fiscal Rs78.26bn of contract awards have
been completed, of which Rs36bn awards have been done in the current
month till date.
Contract pipeline implies pick up in 2HFY12: As per management
Rs138bn of tenders are out. Bids have to be opened for Rs85bn of contracts
in next 45 days and awards are likely over next 3-4months. During 1HFY12
~64% of contracts were awarded to transmission tower EPC players or
conductor suppliers. In 2HFY12 besides a pick up in contract awards by
PGCIL we expect the share of awards to substation equipment suppliers to
play catch up.
SEB debtors. According to management ~Rs5.33bn of receivables (of total
sundry debtors of Rs25.6bn) was over 60days normative payment cycle.
Management does not foresee default by any SEB and extensions to make
payment have been allowed to certain states post discussions in lieu of
PGCIL’s long standing relationship with such customers (SEBs). Investor
concerns had arisen from PGCIL's annual report disclosure on payment
delays (beyond 60days) in few pockets viz. Delhi, Daman & Diu and certain
North Eastern states.
addressed the analyst meet yesterday. The key takeaway was that the
momentum in capitalization seen in Sep-q has continued in the month of
October. So far in FY12, Rs51bn of transmission projects have been
commissioned. Of this ~Rs32.3bn was added to gross block in Sep-q and
~Rs10bn in October so far. Management did not give guidance on
capitalization but they seemed confident that the pick-up is likely to sustain.
We do not see any downside to our Rs98bn capitalization estimate in FY12.
For details on Sep-q results and our OW investment view on the stock see our
last note: "PAT adjusted for notional FX loss ahead of consensus, pick up in
capitalization on expected lines”
Capex guidance for FY12 maintained. So far in FY12 PGCIL has
incurred Rs49bn of capex. Management is confident of a pick-up in balance
5months of the fiscal to achieve full-year target of Rs176bn and thus meet
11th Plan (FY08-12) target of Rs550bn. In our view, the capex guidance
appears challenging and we have maintained est. of Rs140bn capex in
FY12.
Contract awards by PGCIL have gone up sharply in Oct-11: According
to management, so far in current fiscal Rs78.26bn of contract awards have
been completed, of which Rs36bn awards have been done in the current
month till date.
Contract pipeline implies pick up in 2HFY12: As per management
Rs138bn of tenders are out. Bids have to be opened for Rs85bn of contracts
in next 45 days and awards are likely over next 3-4months. During 1HFY12
~64% of contracts were awarded to transmission tower EPC players or
conductor suppliers. In 2HFY12 besides a pick up in contract awards by
PGCIL we expect the share of awards to substation equipment suppliers to
play catch up.
SEB debtors. According to management ~Rs5.33bn of receivables (of total
sundry debtors of Rs25.6bn) was over 60days normative payment cycle.
Management does not foresee default by any SEB and extensions to make
payment have been allowed to certain states post discussions in lieu of
PGCIL’s long standing relationship with such customers (SEBs). Investor
concerns had arisen from PGCIL's annual report disclosure on payment
delays (beyond 60days) in few pockets viz. Delhi, Daman & Diu and certain
North Eastern states.
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