Sharekhan's research report on Power Grid Corporation of India
India’s aim to expand renewable energy (RE) capacity to ~500GW by 2032 would require significant investment in transmission infrastructure. Thus, Power Grid sees a large addressable market and estimates its transmission capex at Rs. 1.71 lakh crore up to 2032 and expects capex revival to Rs. 20,000-25,000 crore starting from FY25-26. This makes us optimistic of pick-up in Power Grid’s capex/asset capitalization. Focus on new opportunities in power value chain like smart meters, smart grid, energy storage would diversify earnings stream and create value in the long term. Smart metering is gaining traction as Power Grid received an order to install 69 lakh smart meters for Gujarat discoms at an investment of Rs. 4067 crore. Robust work in hand (Rs. 48,700 crore), large transmission bid pipeline and a regulated RoE model provides healthy earnings growth visibility with likelihood of upside to our earnings estimates in case of a faster pick-up in transmission capex.
Outlook
We maintain a Buy rating on Power Grid with an unchanged PT of Rs. 290. A valuation of 1.7x FY2025E its P/BV seems attractive, considering a decent growth outlook, healthy RoE of 19%, and a dividend yield of ~6%.
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