Sharekhan's research report on Power Grid Corporation of India
Large investment opportunity of up to Rs. 1,24,148 crore in interstate power transmission system (ISTS) over FY23-27 given the capex for RE capacity expansion and sharp rise in works in hand to Rs. 52,000 crore (including Leh-Kaithal project worth Rs. 26,000 crore) provide scope for pick-up in Power Grid’s capex from FY24 and could re-rate the stock. Exploring non-transmission opportunities (has set-up PowerGrid Energy Services) in power sector like energy management, smart meters, smart grid, energy storage would diversify earnings stream and create value in the long term. Asset monetization target of Rs. 6,600 crore for FY23 and no REC takeover plan would mean sustained high dividend payout of ~60% (based on FY22) and dividend yield of 6-7%.
Media reports indicate that the Power ministry has recently rejected the proposal for REC’s takeover by Power Grid. This removes overhang of investment in unrelated business and focus shifts to Power Grid’s strong earnings visibility given regulated RoE model. We maintain Buy on Power Grid with an unchanged PT of Rs. 265 as stock price correction of 15% from 52-week high and attractive valuation of 1.6x FY24E P/BV provides investment opportunity.
At 17:30 Power Grid Corporation of India was quoting at Rs 212.15, up Rs 3.65, or 1.75 percent.
It has touched an intraday high of Rs 218.60 and an intraday low of Rs 207.45.
It was trading with volumes of 1,699,878 shares, compared to its thirty day average of 901,239 shares, an increase of 88.62 percent.
In the previous trading session, the share closed up 0.34 percent or Rs 0.70 at Rs 208.50.
The share touched its 52-week high Rs 248.25 and 52-week low Rs 180.30 on 10 May, 2022 and 12 November, 2021, respectively.
Currently, it is trading 14.54 percent below its 52-week high and 17.67 percent above its 52-week low.
Market capitalisation stands at Rs 147,984.23 crore.
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