Power Grid Corporation of India Ltd's (PGCIL) 1QFY20 standalone reported PAT was up 8% YoY at Rs24 bn, which was in-line with our estimates. Standalone capitalization for the quarter stood at Rs14 bn as against Rs25 bn in 1QFY19. The management has maintained consolidated capex Rs150 bn and capitalization of Rs200-250 bn for FY20, subject to commissioning of Raigarh-Pugalur 800 project which is facing headwinds. We expect PGCIL to benefit from upcoming opportunities worth Rs430 bn for evacuation of RE capacity of 66.5 GW by Dec 2021. We expect company to announce higher dividend payouts (45% in FY19 vs 35% in FY18) due to lower capex guidance. The stock is currently trading at 1.7x/1.6x FY20/21E P/Bv. We are positive on the company due to 1) Only Power utility to report higher RoE (16-18%) on consistent basis, 2) Immune from any fuel related issue 3) Dividend yield of 4-4.7%.
OutlookWe maintain BUY rating with TP of Rs224 (implied multiple is 1.6x FY21 BV).
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