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February 15, 2013

ICICI Securities Ltd|Retail Equity Research

Result Update

WHATS CHANGED

PRICE TARGET ........................................................................... Changed from | 77 to | 72

EPS (FY13E) ............................................................................. Changed from | 4.3 to | 3.6

EPS (FY14E) ............................................................................. Changed from | 4.7 to | 4.6

RATING............................... .................................... .................... Changed from Buy to Hold

Disappointment on tolling and other incomePTC India reported Q3FY13 results, which were below expectations.Lower-than-expected tolling business volumes/performance and lowerother income (| 1.3 crore vs. estimates of | 7 crore) were the key reasonfor PAT deviation. Reported PAT came in at ~| 22 crore vs. estimate of| 28 crore. Key reason for lower other income was | 70 crore equitycommitment towards Teesta Project owing capital cost revision.Tolling volumes, grid constraints pull down overall performanceTolling volumes from Simhadri came in below expectations at 22.7 crore

units as the boiler faced some teething issues. Even realisations were

lower at | 5.3/unit vs. | 5.5/unit in Q2FY13. This, we believe, impacted the

financial contribution from the tolling business. Also, short-term volumes

and margins got impacted due to grid constraints as the same was

diverted to power exchanges and hence, lower margins. Trading margins

for Q3FY13 stood at 3.8 paisa vs. 4 paisa in Q2FY13.

TN dues to reduce by H1FY14Given the reconstitution of the TN SEB board, of late, PTC has notreceived any further payments as the total outstanding stood at | 380

crore. However, the management expects payments to resume soon

while outstanding will be cleared by H1FY14. On the other hand, the

company has not provided any timeline on payments from UP SEB but is

expecting things to resume in FY14 given UP SEB has no choice but to go

for disciplined price hikes and adhere to the SEB restructuring package.

Pick-up in long term PPA, recovery of dues from SEB key monitorablesGradual stabilisation of the tolling business (Simhadri, Meenakshi and

Amarkantak volumes) coupled with stable base business operations

provide reasonable visibility. Though margins are expected to move in

the 4-4.5 paisa range, we believe contribution of long term volumes will

rise gradually from hereon. Also, recovery of dues from SEBs will be

significant medium term catalyst for re-rating. Hence, we recommend

HOLD rating on the stock with a target price of | 72/share.

Exhibit 1:Key Financials|crore Q3FY13 Q3FY13E Q3FY12 Q2FY13 YoY Gr(%) QoQ Gr(%)

Total Revenues 1,877.8 2,847.0 1,330.0 2,793.0 41 -33

EBITDA 30.0 30.9 21.0 57.1 43 -47

EBITDA Margin (%) 1.6 1.1 1.6 2.0 (290 bp) (220 bp)

Depreciation 1.0 1.0 1.1 1.0 -10.6 0.0

Other Income 1.2 7.0 4.3 6.2 -71.1 -80.2

Interest 0.0 0.0 10.3 0.0 -100.0 NA

Net Profit 22.7 28.0 9.5 45.0 138.2 -49.6EPS (|) 0.8 0.9 0.3 1.5 142 -50 Source: Company, ICICIdirect.com Research

PTC India (POWTRA)

| 68

ting matrix

ing :.......Hold

get : | 72

get Period : 12 months

ential Upside : 5%

y Financials

Crore) FY11 FY12 FY13E FY14E

t Sales 8997 7667 8958 12855

ITDA 140 147 148 161

t Profit 139 120 114 135

luation summary

FY11 FY12 FY13E FY14E

(x) 14.9 17.2 18.1 15.3

rget PE (x) 14.5 16.7 17.5 14.9

/EBITDA (x) 17.6 11.8 12.2 10.4

BV (x) 1.0 0.9 0.9 0.9

NW (%) 6.4 5.4 5.0 5.6

CE (%) 9.1 7.5 7.0 7.9

ock data

arket Capitalisation | 2062 Crore

bt (Q3FY13) | 0 Crore

sh (Q3FY13) | 150 Crore

| 1912Crore

week H/L | 150/39

uity capital | 294 Crore

ce value | 10

F Holding (%) 15.3

Holding (%) 15.6

ce movement

30

44

58

72

86

100

Feb-13Nov-12Aug-12May-12Feb-12

4,000

4,500

5,000

5,500

6,000

6,500

Price (R.H.S) Nifty (L.H.S)

alysts name

hirag J Shah

[email protected]

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ICICI Securities Ltd|Retail Equity Research Page 2

Exhibit 2:Assumption SheetFY10 FY11 FY12 FY13E FY14E

Volume (billion units) 18.2 24.5 27.8 27.7 32.9

% of Short term volumes 62.3 66.7 63.2 64.8 58.5

% of Long term volumes* 37.7 33.3 36.8 35.2 41.5

PAT growth 3.0 47.1 -13.1 -5.0 17.7

Source: Company, ICICIdirect.com Research* Includes cross border trades with Bhutan.

Result analysis and key conference call highlights

Volumes from the Simhadri tolling project got impacted owing tostabilisation issues in the boiler in Q3FY13. The management has

clarified that issues have been resolved

Volumes from the power tolling agreement with Simhadri Powerstood at 22.7 crore units

We expect the share of long term power to be at 35% and 42% byFY13E and FY14E, respectively

The management expects Meenakshi Power to contribute to longterm volumes by Q1FY14. Also, the company expects projects tothe tune of 3000 MW over FY13E-14E and 5900 MW in FY15E

Total PPAs signed by the company as of Q3FY13 stood at 14402MW (including cross border trade)

Exhibit 3: Trend in volumes traded

5159

3797

2180

4204

6388

4440

3201

5700

7730

5860

5191

6726

8655

45644380

6566

9428

5871

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Q2FY09

Q3FY09

Q4FY09

Q1FY10

Q2FY10

Q3FY10

Q4FY10

Q1FY11

Q2FY11

Q3FY11

Q4FY11

Q1FY12

Q2FY12

Q3FY12

Q4FY12

Q1FY13

Q2FY13

Q3FY13

(millionunits)

.

Source: Company, ICICIdirect.com Research

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Exhibit 4: Movement in realisation and cost per unit of power traded

0

1

2

3

4

5

6

Q1FY11Q2FY11Q3FY11Q4FY11Q1FY12Q2FY12Q3FY12Q4FY12Q1FY13Q2FY13Q3FY13

(|)

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

(|)

.

Average Realisation Cost per Unit Trading Margin (Rs)


Exhibit 5: Projection for volume growth

13825

18233

24481 24325

27659

32860

5000

10000

15000

20000

25000

30000

35000

FY09 FY10 FY11 FY12 FY13E FY14E

(million

units)

.


Exhibit 6: Strategic investments made by PTC

Company PTC Stake (%)

Amount invested

by PTC (| crore)

PTC India Financial Services 60.0 268

PTC Energy 100.0 55

Athena Energy Ventures 18.0 27

Teesta Urja 11.0 156

Krishna Godavari Power Utilities 34.7 130

Chenab Valley Projects 2.0 0

Total 635 Source: Company, ICICIdirect.com Research

We expect PTC to register volumes of 27.7 BUs and 32.9

BUs in FY13E and FY14E, respectively

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Valuations

Gradual stabilisation of the tolling business (Simhadri, Meenakshi and

Amarkantak volumes) coupled with stable base business operations

provide reasonable visibility. Though margins are expected to move in

the 4-4.5 paisa range, we believe contribution of long term volumes will

rise gradually from hereon. Also, recovery of dues from SEBs will be asignificant medium term catalyst for rating. Hence, we recommend

HOLD rating on the stock with a target price of | 72/share.

For the base business, we are expecting PTC to report a volume of

2770crore and 3290 crore units for FY13E and FY14E respectively. We

have valued the same at 9x FY14E EPS. On the other hand, we have

applied a 20% holding company discount to the stake held in PFS and 1x

on equity invested in strategic investments.

Exhibit 7: Valuation snapshot

Particulars Basis of Valuation Value per share

Core Business 9x FY14E EPS 43

PFS 20% Holding Co. discount on Market Cap 14Other Investments 1x BV 15

Total Valuation 72

CMP 69

Upside/(Downside) 3.6 Source: Company, ICICIdirect.com Research

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Financial summary

Profit and loss statement

(| Crore)

(Year-end March) FY11 FY12P FY13E FY14E

Total operating Income 8,997.3 7,667.2 8,957.7 12,855.2Growth (%) 15.8 -14.8 16.8 43.5

Raw Material Expenses 8,837.1 7,491.5 8,777.4 12,661.7

Employee Expenses 7.0 11.9 13.1 13.7

Administrative Expenses 0.0 0.0 0.0 0.0

Other expenses 13.3 16.4 18.8 18.6

Total Operating Expenditure 8,857.4 7,519.9 8,809.3 12,694.0

EBITDA 139.9 147.3 148.4 161.2

Growth (%) 119.6 5.3 0.7 8.7

Depreciation 5.0 4.5 4.1 4.3

Interest 1.1 26.0 0.0 0.0

Other Income 63.0 50.5 16.5 32.0PBT 196.8 167.4 160.7 188.9

Others 0.0 0.0 0.0 1.0

Total Tax 58.3 47.0 46.4 54.3

PAT 138.5 120.4 114.3 134.6

Growth (%) 46.9 -13.1 -5.0 17.7

EPS (|) 4.7 4.1 3.9 4.6


Cash flow statement

(| Crore)

(Year-end March) FY11 FY12E FY13E FY14E

Profit after Tax 138.5 120.4 114.3 134.6Add: Depreciation 5.0 4.5 4.1 4.3

(Inc)/dec in Current Assets 427.9 1,656.7 -200.0 389.3

Inc/(dec) in CL and Provisions 211.0 771.0 236.3 792.4

Others -934.0 -3,300.0 -300.0 -1,000.0

CF from operating activities -151.5 -747.5 -145.3 320.6

(Inc)/dec in Investments -176.7 229.1 -70.0 0.0

(Inc)/dec in Fixed Assets -1.1 -0.3 -0.2 -0.2

Others 60.3 -26.0 0.0 0.0

CF from investing act ivit ies -117.5 202.9 -70.2 -0.2

Issue/(Buy back) of Equity 0.4 0.0 0.0 0.0

Inc/(dec) in loan funds 0.0 0.0 0.0 0.0

Dividend paid & dividend tax -41.2 -51.4 -51.4 -51.4Inc/(dec) in Sec. premium 3.2 0.0 0.0 0.0

Others 0.0 0.0 0.0 1.0

CF from financing activities -37.6 -51.4 -51.4 -50.4

Net Cash flow -306.5 -596.0 -266.8 270.1

Opening Cash 994.5 688.0 92.0 -174.8

Closing Cash 688.0 92.0 -174.8 95.3


Balance sheet

(| Crore)


Liabilities

Equity Capital 295.0 295.0 295.0 295.0

Reserve and Surplus 1,877.6 1,946.6 2,009.6 2,092.8

Total Shareholders funds 2,172.6 2,241.6 2,304.5 2,387.8

Total Debt 0.0 0.0 0.0 0.0

Total Liabilities 2,172.6 2,241.6 2,304.5 2,387.8

Assets

Gross Block 61.0 62.1 62.3 62.5

Less: Acc Depreciation 24.0 29.0 34.1 39.2

Net Block 36.9 33.1 28.3 23.4

Capital WIP 0.0 0.0 0.0 0.0

Total Fixed Assets 36.9 33.1 28.3 23.4

Investments 1,052.7 823.5 893.5 893.5

Inventory 0.0 0.0 0.0 0.0

Debtors 977.9 2,581.0 2,434.5 2,819.4

Loans and Advances 22.3 85.6 22.3 22.3

Other Current Assets 10.1 0.4 10.1 14.6

Cash 687.7 45.8 -174.8 95.3

Total Current Assets 1,698.0 2,712.8 2,292.2 2,951.6

Creditors 546.3 1,310.8 1,546.5 2,338.9

Provisions 54.7 61.3 61.9 61.9

Total Current Liabilities 601.1 1,372.0 1,608.4 2,400.8

Net Current Assets 1,083.0 1,330.6 683.9 424.2

Others Assets 0.0 0.0 0.0 0.0

Application of Funds 2,172.6 2,241.2 2,304.6 2,387.8


Key ratios


Per share data (|)

EPS 4.7 4.1 3.9 4.6

Cash EPS 4.9 4.2 4.0 4.7

BV 73.7 76.0 78.1 80.9

DPS 1.5 1.5 1.5 1.5

Cash Per Share 23.3 1.6 -5.9 3.2

Operating Ratios (%)

EBITDA Margin 2.2 2.2 1.8 1.5

PBT / Total Operating income 2.2 2.2 1.8 1.5

PAT Margin 1.5 1.3 1.0 1.0

Inventory days 0.0 0.0 0.0 1.0

Debtor days 39.8 121.5 98.3 79.2

Creditor days 21.6 60.6 30.0 28.0

Return Ratios (%)

RoE 6.4 5.4 5.0 5.6

RoCE 9.1 7.5 7.0 7.9

ROA 6.4 5.3 4.9 5.6

Valuation Ratios (x)

P/E 14.9 17.2 18.1 15.3

EV / EBITDA 12.9 12.3 12.2 11.2

EV / Net Sales 0.2 0.2 0.2 0.1

Market Cap / Sales 0.2 0.3 0.2 0.2

Price to Book Value 1.0 0.9 0.9 0.9

Solvency Ratios

Debt/EBITDA 0.0 0.0 0.0 0.0

Debt / Equity 0.0 0.0 0.0 0.0

Quick Ratio 1.7 1.9 1.5 1.2


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Company Description

PTC India Ltd, a Government of India initiative, is a pioneer in starting a

power market in India. The company has maintained its leadership

position in power trading since inception and at present has around 41%

share of the trading market. PTC has also been authorised by theGovernment of India to trade electricity with Bhutan and Nepal. The

company is also actively participating on Indian Energy Exchange, the

first national level power exchange in the country. The trading activities

undertaken by PTC include long term trading of power generated from

large power projects as well as short-term trading arising as a result of

supply and demand mismatches, which inevitably arise in various regions

of the country.

Exhibit 8: Recommendation History

30

50

70

90

Feb-13Jan-13Nov-12Oct-12Aug-12Jul-12May-12Apr-12

|

Price Target Price

Source: Bloomberg, ICICIdirect.com Research

Exhibit 9: Recent Releases

Date Event CMP Target Price Rating

4-Apr-12 Q4 FY12 Preview 67 62 Buy

1-Jun-12 Q4 FY12 Review 55 68 Buy

17-Aug-12 Q1 FY13 Review 60 65 Hold

8-Oct-12 Q2FY13 Preview 60 65 Hold

9 noc 2012 Q2FY13 Review 68 77 Buy

8-Jan-13 Q3FY13 Preview 78 77 Hold

Source: ICICIdirect.com Research

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ICICIdirect.com coverage universe (Power)M Cap

(| Cr) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E

JP Power(JAIHYD) 32 39 Buy 8,797 1.5 2.2 3.0 20.9 14.5 10.7 16.0 10.8 9.2 6.3 8.1 8.2 7.3 9.5 12.6

NHPC (NHPC) 28 27 Hold 23,986 2.3 2.2 2.2 12.4 12.7 12.6 10.0 11.5 10.0 9.0 7.6 6.4 10.5 9.5 9.3

NTPC (NTPC) 149 178 Buy 136,050 11.2 11.3 13.0 13.3 13.2 11.5 10.0 11.6 11.0 11.5 10.9 10.5 12.6 12.7 12.7Power Grid (POWGRI) 111 129 Buy 51,382 7.0 8.0 9.1 15.9 13.9 12.2 12.6 12.0 11.3 13.2 12.1 11.6 13.8 14.2 14.5

PTC India (POWTRA) 70 77 Hold 2,032 4.7 4.1 3.7 14.9 17.2 18.8 12.1 14.0 12.2 7.5 6.8 8.0 5.4 4.8 5.7

Tata Power (TATPOW) 94 97 Hold 22306 -4.6 4.5 4.8 NA 20.8 19.4 10.4 10.0 8.6 8.8 7.2 8.6 NA 8.5 8.6

Sector / Company

RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)

CMP RatingTarget

Source: ICICIdirect.com Research

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ICICI Securities Ltd Retail Equity Research Page 8

CICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them

as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional

arget price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;Buy: > 10%/ 15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head Research [email protected] Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No. 7, MIDC,Andheri (East)

Mumbai 400 093

[email protected]

We /I, , Chirag Shah PGDBMresearch analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views

bout any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in thiseport. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

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ompanies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities

enerally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts

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Ptc q3fy13=23-213