PTC India’s Q2FY24: Resilient Growth in Power Trading and Financing Operations
Company Overview:
PTC India is primarily engaged in power trading, generation, and providing financing services across the energy value chain, including projects in generation, transmission, and distribution. Its financing business operates through the subsidiary company PTC India Financial Service Ltd (PFSL), registered as an NBFC with RBI. Additionally, its subsidiary PTC Energy Ltd (PEL) is involved in the import and export of coal, fuels into electricity, fuels linkages, and provides advisory services in the energy sector.
Moderate growth in volumes (1.45% YoY), while core margins rises by 16.1% YoY
Power trading volumes experienced a slight YoY increase of 1.45% to 21,316 million units, with core margins seeing a significant rise of 16.1% YoY to 3.96 paisa per unit. The increase in volumes from long-term and medium-term contracts offset the decline in short-term contract volumes. Long-term and medium-term contracts now constitute 53% of total volumes in Q2FY24.
EBITDA Rises by 29.8% YoY led by higher surcharge income
PTC India reported a standalone EBITDA of Rs 118 Cr, reflecting a substantial YoY increase of 29.8% and a QoQ growth of 5.7%. This growth was primarily led by higher surcharge income, amounting to Rs 34.5 Cr compared to Rs 11.8 Cr in Q2FY23. Operating expenses also showed a notable decline of 40% YoY. Standalone PAT surged by an impressive 113.3% YoY (48.4% QoQ) to Rs 133 Cr, attributed to higher surcharge income and a lower effective tax rate.
Power Trading Volume Mix in Q2FY24
As of Q2FY24, long-term and short-term contracts collectively account for 98% of total trading volumes, with long-term contracts constituting 53% and short-term contracts 45%. Medium-term contracts contribute a minor 2% to the total trading volume.
Valuation and Key Ratios:
Currently trading at a multiple of 8.91x EPS (TTM) of Rs 17.6, PTC India’s market price of 156 implies a significant undervaluation and industry PE stands at 35.6x. With a book value of Rs 172 per share, the company is trading at 0.9x its book value. In terms of EV/EBITDA multiple, PTC India is notably undervalued among its peers at 6.2x, while the median EV/EBITDA for the industry is 19.2x. Trailing twelve months ROE and ROCE stand at 9.03% and 9.21%, respectively, indicating the company’s solvency. The interest coverage ratio is at a comfortable 2.36x.
Q2FY24 Results Updates: Standalone
➡️Power trading volumes saw a slight YoY increase of 1.45% to 21,326 million units, attributed to a decline in short-term contract volumes and a rise in long-medium term contracts.
➡️Revenue for Q2FY24 grew by 6.04% YoY (6.80% QoQ) to Rs 4,880 Cr, driven by higher volumes and surcharge income.
➡️EBITDA increased significantly by 29.8% YoY (5.75% QoQ) to Rs 118 Cr, primarily due to higher surcharge income and reduced operating expenses.
➡️Other income experienced a remarkable YoY growth of 18x and a QoQ increase of 379% to Rs 50 Cr, including a dividend of Rs 41.7 Cr received from a subsidiary company during the quarter.
➡️PAT surged by an impressive 113.2% YoY (48.4% QoQ) to Rs 133 Cr, led by higher surcharge income and a lower tax rate.
➡️EPS for the quarter stood at Rs 4.51, compared to Rs 3.03 in Q2FY23.
Conclusion:
PTC India has demonstrated resilience and growth in its power trading and financing operations in Q2FY24. The company’s strategic focus on long and medium-term contracts has mitigated the impact of declining short-term volumes. With a notable rise in EBITDA, substantial surcharge income, and prudent cost management, PTC India positions itself as a strong player in the energy sector. The undervaluation indicated by key ratios, coupled with a robust financial performance, suggests positive prospects for investors.
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