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

Sharekhan's research report on Power Grid Corporation of India

Power Grid has won eight TBCB project wins in Q4FY23, thus taking total bid wins to 12 TBCB projects in FY23YTD. Investment approval is also up by 124% y-o-y to Rs. 10,393 crore in FY23YTD. Large addressable power transmission market opportunity of Rs. 2.44 lakh crore by FY30E from renewable energy (RE) projects would drive a pick-up in Power Grid’s capex/asset capitalization and could drive re-rating. Robust projects pipeline of Rs. 25,600 crore (excluding Leh-Kaithal project worth Rs. 22,000 crore), recent new TBCB project wins, and regulated RoE model provides earnings visibility (expect a 10% PAT CAGR over FY22-25E) and keeps us constructive on the stock.

Outlook

Earnings growth visibility, RoE of 18% and healthy dividend yield ~5-6% makes valuation attractive at 1.7x/1.5x FY24E/FY25E P/BV. Hence, we maintain our Buy rating on Power with an unchanged PT of Rs. 265.