RTS Power Cor­po­ra­tion Ltd: Pow­er­ing ahead

Money Times - - Expert Eye - By Vi­hari

(BSE Code: 531215) (CMP: Rs.31.40) (FV: Rs.10)

In­cor­po­rated in De­cem­ber 1947 as Bhan­war­lal Bhuto­ria Pvt Ltd, Kolkata based RTS Power Cor­po­ra­tion (RTS) was pro­moted by Sumer­mal Bhuto­ria. The Bhuto­ria group is a well-di­ver­si­fied multi-lo­ca­tion group en­gaged in cold stor­age, trans­form­ers, ca­bles and con­duc­tors, real es­tate and ware­hous­ing.

RTS is a lead­ing man­u­fac­turer of Power, Dis­tri­bu­tion, Ex­tra High Volt­age (EHV) and Dry-type Trans­form­ers. It launched its IPO in Au­gust 1995 to part-fi­nance its diver­si­fi­ca­tion into power trans­form­ers and a si­mul­ta­ne­ous mod­erni­sa­tion-cum-back­ward in­te­gra­tion pro­gramme. It is an ISO 9001 cer­ti­fied com­pany. It sup­plies its prod­ucts to all State Elec­tric­ity Boards (SEBs)/ DISCOMS, most EPC con­trac­tors, De­fence (MES and Air force), In­dian Rail­ways, pub­lic sec­tor units, pri­vate com­pa­nies and pri­vate util­ity com­pa­nies. Its end-user in­dus­tries in­clude con­struc­tion, steel, agro­pro­cess­ing, tea, sugar, min­ing, in­fra­struc­ture, power, etc.

RTS has man­u­fac­tur­ing units in West Ben­gal,

Agra and Haryana. It has ex­ten­sive and mod­ern ca­pa­bil­i­ties in re­pair and reengi­neer­ing of dam­aged trans­form­ers of all makes across the range - 10 kVA, 11/.433 kV to 55 MVA 132/33 kV. It can man­u­fac­ture trans­form­ers up to 50,000 kVA.

For FY18, RTS re­ported 180% higher PAT of

Rs.4.18 crore on 76% higher sales of Rs.213.18 crore and an EPS of Rs.5.12.

Dur­ing Q1FY19, it re­ported 23% higher PAT of Rs.1.35 crore on 10% higher sales of Rs.47.33 crore and an EPS of Rs.1.65.

With an eq­uity cap­i­tal of Rs.8.17 crore and re­serves of Rs.95.99 crore, RTS’ share book value works out to Rs.127.51. The value of its gross block is Rs.92 crore. Net debt of Rs.17.4 crore gives it net DER of 0.2:1. The pro­mot­ers hold 67.3% of the eq­uity cap­i­tal and PCBs hold 3.2%, which leaves 29.5% stake with the in­vest­ing pub­lic.

RTS can re­verse en­gi­neer and im­prove/ mod­ify de­signs of ex­ist­ing trans­form­ers and en­sure longevity of the re­paired/reengi­neered trans­former most cost-ef­fec­tively and strengthen it with high qual­ity re­place­ments. Quick turn­around time, prox­im­ity to power util­i­ties and lo­gis­tics ca­pa­bil­i­ties to trans­fer dam­aged equip­ment from site and re-in­stall the same are some of the ben­e­fits its cus­tomers en­joy. In or­der to

en­sure prompt af­ter­sales ser­vices, it has set up ded­i­cated ser­vic­ing teams at its fa­cil­i­ties in Jaipur, Agra and Kolkata. Elec­tric­ity pro­duc­tion in In­dia has grown at 6% CAGR over FY10–FY18. In FY18, it grew 56% YoY to 1,201.543 BU. In March 2017, the Min­istry of Power had launched an ap­pli­ca­tion ‘GARV-II’ to pro­vide real-time data re­lated to ru­ral elec­tri­fi­ca­tion of all un-elec­tri­fied vil­lages in In­dia. Around 17,164 vil­lages out of 18,452 have been elec­tri­fied up to March 2018.

Be­tween April 2000 and June 2018, the in­dus­try at­tracted $14.18 bil­lion in For­eign Di­rect In­vest­ment (FDI), ac­count­ing for 4% of the to­tal FDI in­flows in In­dia. A draft amend­ment to Elec­tric­ity Act, 2003, was in­tro­duced in Septem­ber 2018 to dis­cuss sep­a­ra­tion of con­tent and car­riage, di­rect ben­e­fit trans­fer of sub­sidy, 24x7 power sup­ply as an obli­ga­tion, pe­nal­i­sa­tion on vi­o­la­tion of PPA (power pur­chase agree­ments), set­ting up Smart and Pre­paid Me­ters, etc. In­dia has one Na­tional Grid for the util­ity elec­tric­ity sec­tor with an in­stalled ca­pac­ity of 344.69 GW as at 31 Au­gust 2018. The Gov­ern­ment of In­dia launched Ujwal Discoms As­sur­ance Yo­jana (UDAY) to en­cour­age oper­a­tional and fi­nan­cial turn­around of state-owned power dis­tri­bu­tion com­pa­nies (DISCOMS), with an aim to re­duce Ag­gre­gate Tech­ni­cal & Com­mer­cial (AT&C) losses to 15% by FY19.

For every 1 MW of new ca­pac­ity that comes up, 7-MVA trans­form­ers are used across gen­er­a­tion, trans­mis­sion and dis­tri­bu­tion seg­ments. This im­plies a de­mand of 7,00,000 MVA of trans­form­ers go­ing for­ward, which will re­sult in an an­nual de­mand of about 1,40,000 MVA. Trans­form­ers usu­ally have a life of 20-30 years. Hence, trans­form­ers in­stalled in the 1990s and 2000s are likely to be re­placed in the next few years. In ad­di­tion, 20% of the de­mand for trans­form­ers will come from re­place­ment de­mand, which will en­hance the to­tal de­mand to 8,40,000 MVA. The on-go­ing re­forms in the power and in­dus­trial sec­tor cou­pled with in­creas­ing thrust and mas­sive in­vest­ments lined up in the power sec­tor and timely ex­pan­sion by IMP gives strong rev­enue vis­i­bil­ity in the com­ing years. RTS is ex­pected to notch an EPS of Rs.6.5 in FY19. Tra­di­tion­ally, the sec­ond half of a fis­cal year has al­ways been bet­ter for RTS as ma­jor pub­lic sec­tor or­ders are re­ceived in the last quar­ter. At the CMP of Rs.31.40, the stock trades at a for­ward P/E of just 4.8x. A rea­son­able P/E of 7.5x will take its share price to Rs.49 in the medium-term. The stock’s 52week high/low is Rs.66.40/23.85.

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