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Informist, Monday, Oct. 21, 2024

By Sunil Raghu

AHMEDABAD – Power Grid Corp. of India Ltd. is likely to report muted earnings during the September quarter net profit growth as demand for power in the country stayed low due to prolonged monsoon rainfall and relatively lower temperatures.

Overall, the company's net profit is seen falling 0.3% on year to INR 38.21 billion, according to the average of estimates from six brokerages. The estimates range from INR 36.26 billion by Motilal Oswal Financial Services to INR 39.30 billion by Sharekhan. Power Grid reported a net profit of INR 38.34 billion on revenues of INR 104.19 billion in Jul-Sept last year.

Power Grid’s revenue in Jul-Sept is seen rising 6.9% on year to INR 111.40 billion, according to the average of estimates. The estimates on revenue range from INR 104.36 billion by Motilal Oswal Financial Services to INR 118.78 billion by Elara Securities (India).

The company clocked a net profit of INR 34.12 billion on revenues of INR 100.68 billion in Apr-Jun. Sequentially, the net profit and revenue in Jul-Sept are seen rising 12.0% and 10.7%, respectively, despite moderation in power consumption. The power demand in Jul-Sept witnessed a slowdown, with both base and peak demand levels easing off.

Analysts expect sequential growth in net profit and revenue to come from growth in capacity, transmission line additions, improved hydro generation, sustained volume growth in the short-term market and contributions from solar EPC and rooftop installations.

The state-owned power transmission company operates in three segments – power transmission, telecom and consultancy – with the transmission business accounting for the largest share of the total revenue.

Motilal Oswal sees continued strong contributions from the consultancy segment. The brokerage expects the company's reported net profit to decline 5% on year due to a lower reported tax rate of 12% last year compared to the normalised tax rate assumed for Jul-Sept. Adjusted net profit, on the other hand, is anticipated to rise by 26% on year as last year's profit also included INR 5 billion related to regulatory deferral income, the brokerage said.

Kotak Institutional Equities expects a modest 3.2% on year growth in revenue on account of asset capitalisation of INR 83 billion in the trailing 12 months. It also sees single-digit growth in net profit, reflecting the weak capitalisation on an expanded asset base. Asset capitalisation refers to adding capital expenses to the balance sheet rather than treating them as immediate expenses, thus spreading expenses over a period of time. As part of this, the company does not add expenses for new transmission lines, which haven't begun operations yet, to its profit and loss statement.

Power Grid's earnings before interest, taxes, depreciation, and amortisation in Jul-Sept are seen at INR 97.93 billion, according to the average of five estimates. The lowest estimate for EBITDA is by Motilal Oswal at INR 91.31 billion and the highest estimate is by Elara Securities at INR 104.47 billion.

PowerGrid emerged as the lowest bidder for three transmission projects in Jul-Sept. Some analysts estimated the total transmission opportunity at INR 1.9 trillion, including inter-state transmission opportunities of INR 1.36 trillion. Analysts will keenly await the management's comments on the various projects bid by Power Grid.

The company is yet to announce the date for detailing Jul-Sept earnings. 

On Monday, shares of the company ended at INR 331.15 on the National Stock Exchange, down 0.3% from the previous close. 

Following are the Jul-Sept earnings estimates for Power Grid Corp of India based on reports compiled by Informist from six brokerage houses:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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