Buy Power Grid Corporation of India; target of Rs 345: Motilal Oswal

Motilal Oswal's research report on Power Grid Corporation of India

In 1QFY26, Power Grid Corporation (PWGR) reported a standalone (SA) revenue of INR99.3b (-1% YoY), 6% below our estimate. EBITDA was 12% below our estimate at INR81.2b (-7% YoY), hit by a 66% YoY surge in other expenses. Adj. SA PAT was 6% below our est. at INR34.7b, supported by higher-than-expected other income and lower tax expenses. In the analyst meet, management reiterated its robust capex trajectory, improving capitalization trends, and a strong project pipeline. Capex guidance remains unchanged at INR280b/INR350b/INR450b for FY26/FY27/FY28, respectively. However, the capitalization target for FY26 has been slightly revised downward to INR220b (vs. earlier guidance of INR230–250b), owing to persistent issues related to right-of-way (RoW).

Outlook

We derive our TP of INR345 for PWGR based on FY27E BVPS and a P/B multiple of 3x, which we believe is reasonable given that its capex and capitalization are on a multi-year uptrend with the order book at an elevated level.