Prabhudas Lilladher's research report on Power Grid
Power Grid Corporation of India (PWG) reported a good operational performance in 2QFY17 with a beat in all aspects. Sales at Rs 62.5 bn, up 28.5% YoY (PLe: Rs 57.8 bn) with strong growth in all segments. Revenue from Transmission segment was up 29% to Rs 61 bn, while Consultancy and Telecom were up 53% and 33% respectively. EBITDA was up 30% YoY at Rs 56 bn (PLe: Rs 53.6 bn), while EBITDA margins were up by 120bps YoY to 89.6%. Other income was up 81% YoY to Rs 2.2 bn. PAT was up by 32% YoY to Rs 18.7 bn (PLe: Rs 18.1 bn).
The stock is trading at a valuation of 1.7x P/B FY18E and PER of 11.2x FY18E earnings. We expect the stock to deliver Sales and PAT CAGR of 15% & 18%, respectively, over FY16‐18E. Strong project execution capabilities, history of meeting targets and visibility on investment plans for next few years gives comfort on earning visibility. Increasing asset base and healthy pace of capitalization should also help alleviate concerns of equity dilution. We maintain ‘BUY’ on the stock.
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