Power transmission projects are mainly awarded through, nomination basis to Power Grid (PGCIL) and competitive bidding (TBCB). Sector was opened to TBCB in 2010. Sharp pick-up has been seen only in FY16E, with 9M accounting for 56% of awards to date.
Adani Transmission and Kalpataru Power have won 17% and 10% of 9MFY16E awards and PGCIL 59%. Winner (L1) and L2 (second lowest bidder) differentials have been between 10-17%, barring 2 projects.
Maintain Buy with TP of R185 valuing the company at 2x PB FY17E (in-line with 6-yr mean).
Strong FY11 (R66 bn awards) was followed by a particularly weak FY12-13 (R10-13 bn annually) on TBCB projects. FY14-15 saw a pick-up to R37-39 bn annually.
However, FY16E has been a good year with awards up 6x at R219 bn in 9M itself.
Our industry interactions suggest that competition has resumed in TBCB projects unlike 24 months ago prior to elections. This is reflected in bid differentials of 1-8% between L1 & L2 rising to 10-17% in 9MFY16E.