Hold Power Grid; target of Rs 210: ICICI Direct

ICICI Direct's research report on Power Grid

Power Grid reported Q1FY20 results that were below our estimates as revenues were lower than expected led by single digit growth in transmission revenues. Capitalisation booked in Q1FY20 was below expectations. Reported revenues came in at Rs 8804.1 crore vs. estimate of Rs 9358.2 crore. Transmission revenues for Q1FY20 grew 8.3% YoY at Rs 8651.2 crore vs. our estimate of Rs 9015 crore (14% YoY). On the other hand, consultancy revenues declined 16.9% YoY at Rs 126.3 crore while telecom revenues grew marginally by 1.4% YoY to Rs 194 crore. EBITDA came in at Rs 7896.4 crore, below our estimate of Rs 7973.2 crore. Had other expenses at Rs 409.7 crore in Q1FY20 (vs. Rs 747.9 crore in Q1FY19) not been lower, the EBITDA miss would have been steeper.

Outlook

Hence, we continue to value at a P/B multiple of 1.3x FY21E BV with a fair value of Rs 210 per share.