Buy Power Grid Corp; target of Rs 235: JM Financial

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26 Aug, 2025 12:21

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PGCIL reported a 4QFY18 net profit of INR 19.8bn (+8% YoY) after adjusting for wage provisions. This was driven by capitalisation worth INR 78bn (-36% YoY) in 4Q18 and INR 279bn (-4% YoY) for full year FY18. The net profit for FY18 stood at INR 85bn, as growth rate slowed down to 14% YoY vs. 24% growth delivered in FY17, in line with slower capitalisation. We estimate the core RoE to be16% for FY18 vs 17-18% seen in the past. PGCIL has an order book of INR 940bn executable over 3-4 years, which implies annual capex may get capped at INR240-250bn. We factor capitalisation to converge with capex run rate of INR 250bn-260bn/year by FY20-21. FY18 capitalisation clearly show that PGCIL has passed its peak capitalisation in FY17, and earnings growth is slowing down.

Given the recent run up in stock price and no change in our estimates and TP (INR 230), we find limited upside.

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