Buy Power Grid Corp; target of Rs 132: Nirmal Bang

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26 Aug, 2025 12:21

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Nirmal Bang is bullish on Power Grid Corp and has recommended buy rating on the stock with a target of Rs 132 in its July 16, 2012 research report.

“Augmenting capex followed by higher capitalisation (superior project execution run rate) of power transmission assets would boost core earnings of Power Grid Corporation of India (PGCIL). We believe PGCIL remains the safest bet among power transmission companies due to its annuity-based business model (15.5% post-tax regulated RoE) despite the sector’s structural issues. Core demand, higher inter-regional capacity to limit regional deficits and reforms in the distribution space (state electricity boards’ losses, open access) are expected to increase the need for transmission corridors. We believe PGCIL is attractively positioned at the beginning of 12th Five Year Plan (FY13-17), considering the huge capex outlay planned, driving up its regulated equity. We assign a Buy rating to PGCIL with a SOTP-based target price of Rs132, up 18% from the CMP.”

“We expect capex under the 12th Plan to be front-ended (higher quantum in the initial years) based on planned transmission capacity addition over FY13-15E. Consequently, we expect capitalisation of transmission assets worth Rs170bn/Rs172bn in FY13E/FY14E, respectively, resulting in a 23.2% CAGR in regulated equity over FY12-15E compared to 17.6% CAGR achieved over FY08-11. Higher capitalisation leads to higher regulated equity (eligible for earning regulated returns) driving up the reported RoE from 13.9% in FY12 to 14.5%/15.7% in FY13E/FY14E, respectively.”

“We assign a Buy rating to PGCIL with a target price of Rs132, providing 18% upside from the CMP. We have valued the stock on SOTP basis, assuming cost of equity of 12%, RoE of 17% and growth of 7% in regulated equity. The target price comprises core transmission valuation of Rs127/share (based on 2.1x P/BV multiple on FY14E book value) and cash and investments valued at Rs5/share,” says Nirmal Bang research report.  

Non-Institutions holding more than 90% in Indian cos

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