Sharekhan's research repor on Power Grid Corporation of India
Power Grid’s Q2FY2021 PAT grew by 23.4% y-o-y to Rs. 3,117 crore, which was in-line with our estimate of Rs. 3,093 crore. Strong growth was driven by higher capitalisation at Rs. 11,877 crore in H1FY2021 (versus. Rs. 5,687 crore in H1FY20), higher other income, and lower tax rate. Management reiterated its asset capitalisation and capex guidance of Rs. 20,000 crore-25,000 crore and Rs. 10,500 crore, respectively, for FY2021E. Work in hands at Rs. 41,000 crore provides earnings visibility (expect an 11% PAT CAGR over FY2020-FY2023E). Power Grid targets to monetise 5 TBCB assets worth Rs. 7,164 crore in FY2021, which would help unlock value, while potential reduction in receivables (through power sector liquidity scheme) would improve balance sheet.
Outlook
Hence, we recommend Buy on Power Grid with a PT of Rs. 220, given earnings visibility over FY2021E-FY2023E, attractive valuation of 1.2x FY2023E P/BV (31% discount to historical P/BV), and healthy dividend yield at 4%.
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