Power Grid stock soars to record high as investors cheer higher capex outlay

Despite the increased capex outlay, brokerages warn about Power Grid's lofty valuations.

Power Grid Corporation of India shares soared 4 percent to a record high of Rs 356.95 apiece on July 30 as investors cheered for the company as it guided for an increased capital expenditure outlay for FY25.

The company's management has guided for Rs 18,000 crore capex for FY25, up from its previous guidance of Rs 15,000 crore. As for FY26 and FY27, the company has assigned a capex outlay of Rs 25,000 crore and Rs 30,000 crore, respectively.

Despite the increased capex outlay, brokerage firm Nuvama Institutional Equities pointed out that the stock's current valuation factors in all the upside triggers but not the potential downside risks.

With one high-voltage direct current project for Badla already bagged in FY25 and the second one in Khavda yet to enter the bidding stage, Nuvama believes that Power Grid may have run out of near-term triggers pertaining to order intake.

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"Also, after the current round of guidance upgrades on capex/capitalisation, we believe Power Grid may soon enter a phase wherein further upgrades on these fronts might be difficult," the firm stated. On that account, Nuvama retained its 'reduce' call on the stock while slightly raising its price target for Power Grid to Rs 236.

Kotak Institutional Equities also echoed concerns about Power Grid's rich valuations, which according to the brokerage seem lofty given its single-digit earnings growth. Consequently, KIE also retained its 'sell' call on the stock, even though the firm marginally hiked its price target for the stock to Rs 265.

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