Buy Power Grid Corporation of India; target of Rs 265: Sharekhan

Sharekhan's research report on Power Grid Corporation of India

Q3FY23 standalone PAT grew by 10.5% y-o-y to Rs. 3,702 crore (above estimate) led by higher dividend income and lower tax rate of 7.9%, which offset muted asset capitalization. Standalone/consolidated asset capitalisation was muted at Rs. 2,866 crore/Rs. 5,190 crore; down 78%/72% y-o-y in 9MFY23. Q4FY23 asset capitalisation is likely to be robust given full-year guidance of Rs. 10,000-12,000 crore (lower than earlier guidance of Rs. 13,000 crore). Overall receivables continue to increase and stood at Rs. 9234 crore, up 36% q-o-q. Management guided for FY24 capex/asset capitalisation of Rs. 8,800 crore/Rs. 10,000 crore but expects upside to these number given strong Rs. 40,000-50,000 crore of transmission bid pipeline. Asset monetisation delays are disappointing, but the management hinted at maintaining dividend payout ratio of 60%. Power Grid has projects worth Rs. 47,600 crore.

Outlook

We maintain a Buy on Power Grid with an unchanged PT of Rs. 265 as valuation of 1.6x/1.4x FY24E/FY25E P/BV seems attractive given expectation of 10% PAT CAGR over FY22-25E, RoE of 18% and a dividend yield of ~6-7%.

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