1QFY2012 Result Update | Power

August 10, 2011

PTC India
Performance Highlights
Y/E March (` cr) Net revenue Operating profit Net profit
Source: Company, Angel Research

NEUTRAL
CMP Target Price
% chg qoq 19.7 38.3 35.0 1QFY2011 2,758 28 28 % chg yoy (9.8) 71.5 62.6

`76 -

1QFY2012 2,487 48 45

4QFY2011 2,079 34 34

Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

Power 2,636 1.1 145/75 182131 10 18,336 5,486 PTCI.BO PTCIN@IN

For 1QFY2012, PTC India (PTC) reported net profit growth of 62.6% yoy to `45cr, aided by 17% higher traded volumes and higher rebate income of `23cr (vs. `3.5cr). The company benefitted as it retained a substantial portion of rebate (2% of billed amount) received from power sellers, which was not passed on to buyers (mostly Tamil Nadu SEB) due to delayed payments. PTC still has ~`500cr recoverable from Tamil Nadu SEB, which the company hopes to recover in the next two months. Management has maintained that no fresh power sale would be made to the SEB until the amounts are fully recovered. We maintain our Neutral view on the stock. Operating profit up 71.5% yoy: PTCs 1QFY2012 power trading volumes rose by 17% yoy to 6.7BU. Net sales fell by 9.8% yoy to `2,487cr due to the decline in average power selling prices. Operating profit grew by 71.5% yoy to `48cr, mainly aided by high rebate income. Outlook and valuation: Going ahead, we expect PTC to witness healthy volume growth due to addition of ~1,300MW and ~4,600MW to its long-term trading (LTT) portfolio in FY2012 and FY2013, respectively. The company has till date signed PPAs and PSAs for ~15,000MW and ~5,400MW and is participating in various case-1 bids to sign more PSAs. We expect PTCs top line and bottom line to witness a CAGR of 22.2% and 23.2%, respectively, over FY201113E. At the CMP of `76, PTC is trading at 11.6x FY2012E and 10.6x FY2013E earnings. We maintain our Neutral view on the stock. Key financials (Standalone)
Y/E March (` cr) Net sales % chg Net profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 16.3 57.8 17.4 8.5

Abs. (%) Sensex PTC

3m 3.4 1.0

1yr 6.6 (17.5)

3yr 9.6 (1.9)

FY2010 7,770 19.0 93 2.7 0.8 3.2 23.9 1.1 5.1 3.1 0.2 19.5

FY2011E 8,997 15.8 139 48.5 1.6 4.7 16.1 1.0 6.5 6.3 0.2 11.0

FY2012E 11,109 23.5 192 38.4 2.0 6.5 11.6 1.0 8.5 9.7 0.2 7.8

FY2013E 13,430 20.9 210 9.7 1.9 7.1 10.6 0.9 8.7 10.5 0.1 6.8

V Srinivasan
022-39357800 Ext 6831 v.srinivasan@angeltrade.com

Please refer to important disclosures at the end of this report

PTC India | 1QFY2012 Result Update

Exhibit 1: 1QFY2012 performance

Y/E March (` cr) Net operating income Consumption of RM (% of Sales) Staff Costs (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation Other Income PBT (% of Sales) Provision for Taxation (% of PBT) Reported PAT PATM (%) EPS (`)
Source: Company, Angel Research

1QFY2012 2,487 2,431 97.7 3 0.1 6 0.2 2,440 48 1.9 1 1 17.4 63 2.5 17 27.7 45 1.8 1.5

4QFY2011 2,079 2,035 97.9 5 0.2 4 0.2 2,044 34 1.7 0 1 14 47 2.3 14 29.2 34 1.6 1.1

% Chg 19.7 19.4 (35.6) 52.7 19.3 38 26bp (14.0) 22.2 32.2 25.3 35.0 35.0

1QFY2011 2,758 2,725 98.8 3 0.1 3 0.1 2,731 28 1.0 0 1 14 40 1.5 13 31.0 27.8 1.0 0.9

% Chg (9.8) (10.8) 25.9 116.3 (10.7) 71 91bp (8.3) 26.3 55 38.6 62.6 62.4

FY2011 8,997 8,837 98.2 7.0 0.1 13 0.1 8,857 140 1.6 1 5 63 197 2.2 58 29.3 139 1.5 4.7

FY2010 7,770 7,675 98.8 18.4 0.2 13 0.2 7,707 64 0.8 0 6 74 132 1.7 38 28.6 94 1.2 3.2

% Chg 15.8 15.1 (62.3) 0.8 14.9 119.9 74bp (8.8) (15.0) 49.2 52.9 47.7 47.5

Exhibit 2: Actual vs. Angel estimates

(` cr) Net revenue Operating profit Net profit
Source: Company, Angel Research

Actual 2,487 47.6 45.2

Estimates 2,839 33.2 32.6

Variation (%) (12.4) 43.4 38.7

Exhibit 3: Operational performance

Parameter Volumes (mn units) % Growth (yoy) Realisation (`/unit) % Growth (yoy) 1QFY12 6,726 17.0 3.7 (23.0) 4QFY11 5,191 62.2 4.0 2.7 3QFY11 5,813 30.8 3.0 (20.4) 2QFY11 7,730 21.0 4.3 10.0 1QFY11 5,747 36.7 4.8 (14.3) 4QFY10 3,200 46.7 3.9 (28.1)

Source: Company, Angel Research

August 10, 2011

PTC India | 1QFY2012 Result Update

Strong volume growth in 1QFY2012

During 1QFY2012, PTC posted strong 17% yoy growth in volume to 6.7BU. Short-term trading (STT) and LTT volumes stood at 4.6bn units and 2.1bn units, respectively. On a yoy basis, LTT volumes were flat, while STT volumes rose by ~27% yoy, aided by a substantial increase in trades done through India Energy Exchange.

Exhibit 4: Operating profit performance

50 40 30 20 10 10 0 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 9 28 38 41 34 48

Source: Company, Angel Research

Conference call Key highlights

The average trading margins for 1QFY2012 excluding rebate and surcharge stood at 4.9 paise. On an average, margins on LTT stood at 6 paise, crossborder trade stood at 2.7 paise, volumes through exchange stood at 2.4 paise, and STT stood at 5 paise. Till date, PTC has signed PPAs for 15,000MW and PSAs for 5,400MW. PTC-Ashmore India Energy Infrastructure Fund, a JV with Ashmore Group Plc launched in FY2010, has been shelved, as Ashmore could not bring sufficient contribution to the fund. The company has written-off `1.7cr of expenditure incurred in relation to the launch of fund during the quarter. PTCs subsidiary, PTC Energy traded ~0.2mn tonnes of coal in 1QFY2012. Coal traded by the company is expected to be 1.4mn tonnes in FY2012. The company has targeted to trade 2.4mn tonnes p.a. from FY2013E and has entered into a five-year coal procurement agreement for this quantity with suppliers in Indonesia. PTC Energys (PTCs 100% subsidiary) tolling projects with Madhucon Projects Ltd. (200MW) and Meenakshi Energy Ltd. (300MW) would begin from 3QFY2012 and 4QFY2012, respectively.

August 10, 2011

(` cr)

PTC India | 1QFY2012 Result Update

Investment arguments
Power deficit to encourage growth
Total volume of power traded in India is just ~8% of the power generated. We expect the volume of power traded to rise at a healthy rate due to continuing power deficit and increased power generation capacity.

Favourable government policies to aid growth

The National Electricity Policy encourages about 15% of new capacities to be tied up in the short-term market. Growing emphasis on allowing open access to consumers to buy power from producers in any state augurs well for power trading companies. In January 2010, CERC had increased the cap on STT margin to 7 paise/unit from the earlier 4 paise/unit, which is a major boost to the companys profitability as the 4 paise/unit cap regime was inadequate to cover operational and market risks borne by trading companies.

PTC to maintain its market leadership position

PTC is currently the leader in power trading with a market share of 4550%. Going ahead, we expect the company to maintain its leadership position in the power trading market due to its early-mover advantage and increased volume of power traded under the LTT route, as close to 5,300MW of projects for which the company has signed PPAs are set to be operational in FY2012 and FY2013.

Outlook and valuation

Going ahead, we expect PTC to witness healthy volume growth due to addition of ~1,300MW and ~4,600MW to its long-term trading (LTT) portfolio in FY2012 and FY2013, respectively. The company has till date signed PPAs and PSAs for ~15,000MW and ~5,400MW and is participating in various case-1 bids to sign more PSAs. We expect PTCs top line and bottom line to witness a CAGR of 22.2% and 23.2%, respectively, over FY201113E. At the CMP of `76, PTC is trading at 11.6x FY2012E and 10.6x FY2013E earnings. We remain Neutral on the stock.

August 10, 2011

PTC India | 1QFY2012 Result Update

Exhibit 5: One-year forward P/E band

250 200
(Share Price `)

150 100 50 0 Apr-06 Apr-07 Price Apr-08 15x 20x Apr-09 25x Apr-10 30x Apr-11

Source: Company, Angel Research

Exhibit 6: Change in estimates

(` cr) Earlier Net sales Operating exp. Operating profit Depreciation Interest PBT Tax PAT
Source: Angel Research

FY2012E Revised 11,109 10,883 226 6 1 275 84 192 Variation (%) (9.6) (9.9) 6.2 (13.9) 40.0 5.5 7.3 4.8 Earlier 14,292 14,044 248 8 2 289 87 202 12,292 12,078 213 7 1 261 78 183

FY2013E Revised Variation (%) 13,430 13,170 260 7 2 302 92 210 (6.0) (6.2) 4.9 (10.7) (12.5) 4.5 5.5 4.1

August 10, 2011

PTC India | 1QFY2012 Result Update

Profit and loss statement (Standalone)

Y/E March (` cr) Total operating income % chg Total Expenditure Net Raw Materials Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) PBT % chg Tax (% of PBT) PAT (reported) % chg (% of Net Sales) Basic EPS (Rs) % chg FY2008 FY2009 FY2010 3,906 3.7 3,887 3,808 7 72 19 (36.9) 0.5 1 18 (38) 0.5 2 43 0.8 52 31.7 10 19.8 49 44.9 1.1 2 (8.5) 6,529 67.1 6,503 6,386 15 101 26 36.6 0.4 6 20 11 0.3 4 97 0.9 113 119.8 23 19.9 91 119.5 1.4 4 86.5 7,770 19.0 7,707 7,675 18 13 63.0 141.4 0.8 6 57 191 0.7 0 74 0.6 131 15.2 38 28.8 93 2.4 1.2 3 (20.7) FY2011 FY2012E FY2013E 8,997 15.8 8,857 8,837 7 13 140 122.5 1.6 5 135 135 1.5 1 63 0.3 197 50.6 58 29.6 139 49.0 1.5 5 48.3 11,109 23.5 10,883 10,853 13 16 226 61.5 2.0 6 220 63 2.0 1 57 0.2 275 39.9 84 30.4 192 38.4 1.7 6 38.4 13,430 21 13,170 13,135 16 20 260 15 2 7 253 15 2 2 51 0 302 10 92 30 210 10 2 7 9.7

August 10, 2011

PTC India | 1QFY2012 Result Update

Balance sheet (Standalone)

Y/E March SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 227 1,252 1,480 5 1,485 60 8 52 1 1,326 326 124 23 179 221 105 1,485 227 1,309 1,537 9 1,546 60 14 47 1 799 1,000 626 19 355 300 699 1,546 295 1,802 2,096 9 2,105 61 19 42 1 876 1,577 994 51 531 390 1,187 2,105 295 1,885 2,180 7 2,188 62 24 38 1,053 1,698 688 32 978 601 1,097 2,188 295 2,029 2,324 9 2,333 75 30 44 1 1,053 1,736 473 56 1,207 501 1,235 2,333 295 2,189 2,484 9 2,493 89 38 51 1 1,053 1,982 455 67 1,460 594 1,387 2,493 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

August 10, 2011

PTC India | 1QFY2012 Result Update

Cash flow statement (Standalone)

Y/E March Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc)/ Decin Fixed Assets (Inc)/ Dec in Investments (Inc)/ Dec in loans and adv. Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2008 FY2009 FY2010 59 1 6 43 6 18 (37) (1,115) 43 (1,109) 1,192 27 (1) 1,167 75 48 124 113 6 (77) 97 18 (72) (1) 527 97 624 41 8 (49) 502 124 626 131 6 (111) 74 38 (86) (0) (77) 74 (3) 500 41 0 458 369 626 994 FY2011 FY2012E FY2013E 197 5 (217) 63 60 (138) (1) (177) 63 (114) 0 41 15 (56) (307) 994 688 275 6 (348) 57 84 (207) (14) 0 57 43 51 (51) (215) 688 473 302 7 (171) 51 92 (4) (14) 51 37 51 (51) (18) 473 455

August 10, 2011

PTC India | 1QFY2012 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT/Int.) (0.1) (6.5) 8.6 (0.4) (24.0) 5.5 (0.5) (15.8) 155.3 (0.3) (4.9) 120.6 (0.2) (2.1) 157.3 (0.2) (1.8) 144.6 94 16 21 (1) 109 15 15 2 128 21 16 6 146 31 20 12 162 36 18 19 164 21 15 23 2.0 88.6 5.6 1.3 25.7 6.0 3.1 32.5 5.1 6.3 39.7 6.5 9.7 35.1 8.5 10.5 28.3 8.7 0.5 80.2 5.0 1.8 0.3 80.1 5.7 1.4 0.7 71.2 7.7 4.0 1.5 70.4 6.9 7.3 2.0 69.6 6.6 9.1 1.9 69.6 6.9 9.0 2.1 2.1 2.2 1.2 65.1 4.0 4.0 4.3 1.8 67.6 3.2 3.2 3.4 1.4 71.2 4.7 4.7 4.9 1.4 73.9 6.5 6.5 6.7 1.7 78.8 7.1 7.1 7.4 1.7 84.2 35.3 34.4 1.2 1.5 0.4 83.4 1.1 18.9 17.7 1.1 2.4 0.2 41.9 0.7 23.9 22.5 1.1 1.9 0.2 19.5 0.6 16.1 15.5 1.0 1.8 0.2 11.0 0.7 11.6 11.3 1.0 2.3 0.2 7.8 0.8 10.6 10.2 0.9 2.3 0.1 6.8 0.7 FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

August 10, 2011

PTC India | 1QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

PTC India No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

August 10, 2011

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