Buy Power Grid Corporation of India: target of Rs 240: Sharekhan

Sharekhan's research report on Power Grid Corporation of India

Crore transmission business to witness steady growth as capitalisation trend (FY22 guidance of Rs17,000-20,000 crore) is likely to sustain, led by RE projects (RE transmission scheme of 66.5W and other projects of 30GW/25GW in Gujarat/Rajasthan). Revamped Distribution Sector Scheme with an estimated outlay of Rs. 3 lakh crore over FY22-FY26 provides new investment opportunity and Power Grid aims capex of Rs. 10,000 crore-12,000 crore each in smart metering and distribution infrastructure. The government’s transmission asset monetisation target of Rs. 45,200 crore over FY2022E-FY2025E for Power Grid would help unlock value, provide capital for growth, and could result in higher dividend going forward.

Outlook

We maintain a Buy on Power Grid with a revised PT of Rs. 240 as valuation remains attractive at 1.4x FY24E P/BV considering steady growth in core business, emerging new growth opportunities, and healthy dividend yield of 6%.