PTC

PTC is India’s largest power trading company, promoted by PSU majors NHPC, NTPC, Power Grid and Power Finance Corporation, with a 46.5 per cent share of traded electricity volumes. PTC has built a presence across the entire energy value chain, which includes advisory services, investments in power projects, power tolling and fuel intermediation.

Key Investment Positives:

Ø The constant shortage of power is prompting many merchant power and captive capacities to be commissioned.

Ø This is likely to increase the trading volumes and offers immense scope for companies involved in power trading.

Ø Increased focus on long-term trades (LTT) reduces the seasonality factor inherent to short-term agreements.

Ø It has already signed PPAs and MoUs for purchasing 16313 MW and 18290 MW of power respectively.

Ø A presence across the entire energy value chain may also helps in lifting overall margins, which are thin in power trading.

Ø Possible Regulatory change of removing the cap on trading margins could trigger much better margins and earnings. This will give scope for unrestricted margins and improve the outlook of this company significantly.

Ø Cross-border trades for which PTC is a nodal agency, are expected to increase as more projects come up in Bhutan and Nepal.

Ø Apart from trading, the company’s forays into other related businesses also have the potential to prop up revenues and margins.

Ø ts total traded volumes grew by 24% YoY at 6.4 billion units, which along with late payment penalty received has doubled the EBITDA.

We value the stock at Rs 150 on SOTP basis, valuing its core business, investments in PTC Financial Services, IEX, Krishna Godavari and Athena Energy Ventures and cash & liquid investments. This provides a nearly 40% upside potential from the current price.