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

Sharekhan's research report on Power Grid Corporation of India

Q4FY23 standalone PAT grew by 13% y-o-y to Rs. 4,214 crore (3% above estimate) led by higher other income and lower tax rate, which offset muted asset capitalisation. Standalone/consolidated asset capitalisation was muted at Rs. 4499 crore/Rs. 7413 crore; down 70%/64% y-o-y in FY23 and also below the management’s guidance of Rs. 10,000-12,000 crore. Overall, receivables declined sharply by 48% q-o-q to Rs. 4,821 crore as of March 2023 Subdued FY24 capex/assets guidance of Rs. 8,800 crore/Rs. 10,000-11,000 crore and management expect 7-8% PAT growth in FY24. Renewable energy (RE) projects to result in substantial pick in power transmission investment over FY25-26. Transmission bid pipeline is healthy at Rs31,000 crore and power transmission investment are estimated at Rs4 lakh crore upto 2030.

Outlook

We maintain a Buy on Power Grid with an unchanged PT of Rs. 265 as valuation of 1.4x FY25E P/BV seems attractive given expectation of 10% PAT CAGR over FY23-25E, RoE of 19% and a dividend yield of ~6%.

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