Buy Power Grid Corp; target of Rs 129: Firstcall Research

Firstcall Research is bullish on Power Grid Corporation of India and has recommended buy rating on the stock with a target of Rs 129 in its July 27, 2012 reports.

“Power Grid was incorporated on October 23, 1989 under the Companies Act, 1956 as ‘National Power Transmission Corporation Limited with the responsibility of landing, executing, owning, operating and maintaining the high voltage transmission systems in the country. We received a certificate for commencement of business on November 8, 1990. The name of our Company was changed to its present name ‘Power Grid. Power Grid Corporation of India Ltd is the Central Transmission Utility (CTU) of the country, operating under Ministry of Power, with Assets of company Rs. 50352 Crs as on March 31, 2011 and awarded as Navaratna PSU. The company Owns & operates a transmission network of about 87,878 ckm and 141 nos. of EHV & HVDC Substations. The Company consistently maintains a system availability of over 99.93%, and wheels about 51% of total power generated in the country. At present POWERGRID has established a National Grid with inter-regional power transfer capacity of about 23,800 MW.”

“Power Grid Corporation of India Ltd is the 3rd largest transmission utility in the world, is continuously setting best power transmission practices reported its financial results for the quarter ended 30 June, 2012. The forth quarter witness a healthy increase in overall sales as well as profitability of the company. The company’s net profit jumps to Rs.8701.10 million against Rs.7052.90 million in the corresponding quarter ending of previous year, an increase of 23.37%. Revenue for the quarter rose 31.14% to Rs.28882.50 million from Rs.22024.90 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.88 a share during the quarter, registering 23.37% increase over previous year period. Profit before interest, depreciation and tax is Rs.25563.10 millions as against Rs.19874.60 millions in the corresponding period of the previous year.”

“At the current market price of Rs.114.00, the stock P/E ratio is at 13.35 x FY13E and 11.84 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.8.54 and Rs.9.63 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 18% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 5.11 x for FY13E and 4.71 x for FY14E. Price to Book Value of the stock is expected to be at 1.92 x and 1.65 x respectively for FY13E and FY14E. The first quarter witness a healthy increase in overall sales as well as profitability on account of powerful combination of exciting business segments, and the upcoming projects of the company.”

“We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 129 for medium to long term investment,” says Firstcall Research report. 

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