Should Investors Add PTC India Ltd. (NSE: PTC) to their Basket?

Being a pioneer in initiating the power market in India, PTC India (NSE: PTC) undertakes trading activities. The company’s recent earnings report reflects strong profits, a sound capital position, and a robust cash position. Also, cost management reflects operational efficiency. Additionally, to cater to the changing dynamics of the sector, PTC is on the path of developing solutions and expanding offerings in the form of advisory, energy efficiency, and other associated services. Therefore, investors with buying the dips strategy can build a position in the stock as it is hovering near its 52-week low. Moreover, the company’s sound dividend policy makes it an attractive investment. 

Overview  

PTC India Ltd., formerly known as Power Trading Corporation of India Limited, is a Small Cap company that operates in the Power sector. Incorporated in 1999, the company is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).  

With a market capitalization of about Rs 2,385 crore, PTC India serves clients with power trading solutions, cross-border power trading, and consultancy services. As of June 30, 2022, the company has a total of 29.6 crores shares outstanding.  

Recent Share Price Insights  

• With the current price of Rs 80.60 (at the time of writing), PTC India is trading near the low of its 52-week range of Rs 71.10 – Rs 144.40.  

• The stock recorded a 3-year return of 26.49% as compared to the Nifty Smallcap 100 return of 78.12%.  

Financial Snapshot  

In July, PTC India reported its financial results for the quarter and year ended March 31, 2022. For the quarter, on a standalone basis, the company recorded total sales of Rs 2,833 crore, down 21.2% YoY. Total expenses stood at Rs 2,623 crore, down 23.5% on a YoY basis.  

Net profit after tax more than doubled on a YoY to Rs 156 crore on prudent cost management. Earnings per share came in at Rs 5.27 compared to Rs 2.14 in the prior-year quarter. 

For the year, total sales were Rs 15,631 crore, down 7.9% YoY. Total expenses decreased 7.9% to Rs 15,066 crore, while net profit after tax escalated to Rs 425 crore, up from Rs 410 crore for the year ended March 2021. Earnings per share stood at Rs 14.35, up from Rs 13.86 in the prior year. 

Factors to Consider  

• PTC India is in the leadership position in the Indian power trading market in the terms of the overall trading volumes. 
• Technology advancement is the key to success.  
• Target the consolidation of core trading business and expand value-added services as an integrated energy solutions provider. This indicates the progress of the company.  
• Cost management reflects operational efficiency. 
• Sound dividend payouts over the last five years with an annual dividend yield of 9.26%. 
• Relentless services under power distribution management business. This, in turn, supports big government entities in Madhya Pradesh, Gujarat, Maharashtra, and Orissa. 
• Top-line contraction in 2021-2022 for the first time in the last three years, with the quarterly decline in the March quarter. 
• Competitive pressure. 

Recent Highlights  

Recently, state-run hydro power giant NHPC and PTC India inked a supply deal. Per the terms, NHPC will supply electricity to PTC India that will be generated from the upcoming West Seti & Seti River-6 projects in Nepal. 

Memorandum of Understanding (MoU) states that the Contracted Capacity from NHPC will be purchased from the date of commercial operation of the projects by the company. Later, on a long-term basis, PTC will sell to the state utilities/discoms/bulk consumers in India and neighboring countries. 

Also, an MoU was signed between PTC and SJVN Arun-3 Power Development Company Private Limited (SAPDC) related to the “Sale of Hydropower from SAPDC’s Arun-3 Hydroelectric Project and Lower Arun Hydroelectric Project on Long Term Basis to utilities/consumers in India”. Two hydroelectric projects will be commenced by SAPDC. 

Industry Analysis  

Adequate power infrastructure is key to the sustained growth of the Indian economy. India has one of the most diversified power sectors in the world. Sources of power generation include conventional sources such as coal, lignite, natural gas, oil, hydro, and nuclear power, while non-conventional sources are wind, solar, agricultural, and domestic waste among others. Globally, India is the third-largest producer and consumer of electricity and indicates an installed power capacity of 401.01 GW, as of April 2022. The rising population is leading to increased electrification and per-capita usage, which in turn, is likely to provide further momentum in the sector. By 2022, power consumption is forecast to reach 1,894.7 TWh. Increased investments and economic growth are expected to propel growth in the sector. 

Peer Comparison 

In terms of market capitalization, PTC India ranks after its peer India Energy Exchange. Moreover, the company provides decent ROE, but it remains lower than the peer company. Nevertheless, from a valuation perspective and based on the dividend-yielding nature of the company, investors buying the dips can consider PTC India as a long-term investment.