Buy India Grid Trust; target of Rs 108: Edelweiss

Edelweiss is bullish on India Grid Trust has recommended buy rating on the stock with a target price of Rs 108 in its research report dated March 28, 2018.

Broker Research

April 05, 2018 / 18:05 IST

It seems that nationwide lockdown has not much impacted the fertilizer sector. In May 2020, the Indian Fertiliser industry has witness sales growth of 25% to 5 million tonnes as compared to 4 million tonnes in the same month last year. Coromandel International and Chambal Fertilisers have seen major sales growth in the sector. The research firm Prabhudas Lilladher is bullish on 5 stocks in the sector and among that they expect stock Insecticides India may see the upside of 82 percent, report dated June 09, 2020.

Edelweiss' research report on India Grid Trust

Grid enhancement projects and distribution reforms are set to drive latent power demand and boost investment opportunities in transmission space. We expect INR0.75tn projects to be awarded under TBCB mode. This presents huge opportunity for IndiGrid via its sponsor Sterlite Power, which has historically maintained 30% market share in TBCB orders. This, along with M&A opportunities in transmission, bodes well for IndiGrid.

Outlook

We like IndiGrid’s business model, which entails no volume and tariff revision risks, unlike PGCIL, but fetches similar 15% return (yield + DPU growth) p.a. We anticipate drop down of all ROFO assets to improve 400bps to 12.1% over the next four years, led by higher project IRRs and leverage benefits. We initiate coverage with ‘BUY’ and target price of INR 108 (15% upside) on FY20E, discounting cash flows at 11% COE.

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