Edelweiss is bullish on Power Grid Corporation of India has recommended buy rating on the stock with a target price of Rs 252 in its research report dated November 06, 2017.
Edelweiss' research report on Power Grid Corporation of India
Power Grid Corporation of India’s (PGCIL) Q2FY18 operating performance came in line with 16% revenue growth. Key highlights: a) 50% growth in capitalisation of assets at INR135bn and FY18 guidance of INR280-300bn capitalisation maintained; and b) management indicated that to counter tapering of inter-state project awards for FY18/19, PGCIL is targeting intra-state projects in JV with SEBs. We believe, PGCIL can sustain high capitalisation /capex ratio at more than 1.25x (FY17: 1.27x) till at least FY19 led by stepped-up focus on commissioning. We maintain our investment thesis: (i) regulated equity will post 18% plus CAGR over FY17-19E even on high base; and (ii) unlike the generation segment, core RoE is not contingent on utilisation / power demand growth in the system. New CERC norms (still 3-4 quarters away), where RoE could come under pressure, is key monitorable. Maintain ‘BUY’.
Strong capex visibility, reasonable capitalisation/capex ratio of 1.2x and steady regulated RoE of 15.5-16.0% render PGCIL a good cash proxy with steady returns. We maintain ‘BUY/SP’ with SOTP-based target price of INR252 (exit multiple of 1.9x).
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.