Power Grid Q1 preview: Strong growth likely on the back of telecom, consultancy biz, capex

PGCIL is a central public sector undertaking (CPSU) under the ministry of power dealing in power transmission as well as telecom and consultancy. The stock has gained around 183 percent over the last five years and around 78.9 percent over the last one year.

What are the factors impacting the earnings?

Analysts at Kotak Institutional Equities expect the company to report a modest revenue growth (7.7 percent YoY) due to asset capitalisation of Rs 7,600 crore in the trailing 12 months, while they expect them to report a healthy growth in PAT (11 percent YoY). EBITDA margin is expected to grow 2 basis points YoY from 87 percent in June 2023 to 87.2 percent in June 2024.

Here are some of the factors that analysts expect will impact the earnings.   Growth in capex – The company has set a capex target of Rs 15,000 crore in FY25, 20 percent higher than the FY24 capex of Rs 12,500 crore, say Elara Capital analysts. Capitalisation is likely to double in the range of Rs 1,50,000 – 1,60,000 crore in FY25.

Power demand - Power generation across the sector grew 11 percent YoY growth to 490BU in Q1FY25 due to severe heatwaves with peak demand at 250GW in May, up 13 percent YoY, say broking firms.   Growth of telecom and consultancy segment: Analysts see improved PAT as a result of increased contributions from the telecom and consultancy segment. In Q4, the telecom segment saw 11.8 percent YoY increase in revenue contribution to Rs 2,49,700 crore from Rs  2,08,800 crore in Q4FY23.

Sustained growth in projects: Analysts at Elara Securities note that the quantum of work-in-hand projects rose to Rs 86,700 crore that includes ongoing regulated projects worth Rs 11,200 crore, new regulated projects at Rs 24,700 crore and other projects at Rs 508 crore.   What to look for in the results?
Analysts will be watching out on continued growth in capex and order realisations. Absence of new order or reduced orders due to challenges from the tariff-based competitive bidding route could be a concern. In Q4, the company, according to a May 2024 JM Financial report, had highlighted an estimated Rs 17,000 crore outlay in other businesses such as solar generation, smart metering and data center over the next 7-8 years. With continued government push for these segments, analysts will be awaiting announcements on the same.

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