Sharekhan has given Buy recommendation for Power Grid Corporation of India with a target price of Rs. 245 in its research report issued on Feb 12, 2021
Sharekhan’s research report on Power Grid Corporation of India
Q3FY2021 PAT increased by 24.3% y-o-y to Rs. 3,324 crore, which was 4.7% above our estimate of Rs. 3,174 crore. Robust growth in PAT was led by capitalisation of Rs. 12,574 crore in 9MFY2021 and higher other income (up 25.7% y-o-y). Management has guided for capex of Rs. 10,500 crore/Rs. 7,500 crore and asset capitalisation of Rs. 21,000 crore/Rs. 10,000 crore for FY2021E/FY2022E. Work in hand at Rs. 47,100 crore provides earnings visibility (expect a 17% PAT CAGR over FY2021E-FY2023E). Monetised five TBCB assets worth Rs. 7,200 crore through the launch of InvIT by March 2021 could help unlock value. Reduction in receivables (through the power sector package of over Rs. 3 lakh crore) would improve the balance sheet.
Hence, we maintain our Buy rating on Power Grid with a revised PT of Rs. 245, given earnings visibility, attractive valuation of 1.3x its FY2023E P/BV (25% discount to historical P/BV), and healthy dividend yield at 5%.