Edelweiss' research report on Power Grid Corporation of India
Power Grid Corporation of India’s (PGCIL) Q1FY18 operating performance came in line with estimate with 17% revenue growth. Though H1 is normally slow with respect to capitalisation of assets, the company reported 44% growth (capitalization of INR35bn) in the same in Q1FY18. We believe, PGCIL can sustain high capitalisation /capex ratio at more than 1.25x (FY17: 1.27x) over the next 2‐3 years led by stepped‐up focus on commissioning.
Outlook
We increase our SOTP based target price to INR 252 (INR225 earlier) factoring in lower risk free rate at ~7% versus 8% earlier. This implies an exit multiple of 2.1x. Maintain 'BUY/SP'.
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