Sharekhan has given Buy recommendation for Power Grid Corporation of India with a target price of Rs. 265 in its research report issued on Aug 11, 2022
Sharekhan’s research report on Power Grid Corporation of India
Q1FY23 saw steady 15% y-o-y growth in standalone PAT to Rs. 3,766 crore (11% above our estimate) led by lower interest cost and tax rate of just 12% (down 763 bps y-o-y). Surcharge/incentive income rose by 76%/35% y-o-y to Rs. 97 crore/Rs. 149 crore. Standalone/consolidated asset capitalisation was muted at Rs. 1,332 crore/Rs. 1,345 crore; down 70%/76% y-o-y. Receivables also rose by 36% q-o-q to Rs. 5,856 crore but management expects the same to normalise by March 2022. Company marginally raised asset capitalisation guidance to Rs. 11,000 crore (versus Rs. 10,000 crore earlier). Power Grid has projects worth Rs. 52,000 crore (including Rs. 26,000 crore for Leh-Kaithal transmission corridor) that provides decent earnings growth visibility.
We maintain a Buy on Power Grid with an unchanged PT of Rs. 265 as valuation of 1.7x FY24E P/BV seems attractive given expectation of 11% PAT CAGR over FY22-24E, RoE of 19% and a dividend yield of ~7%.