iifl-logo

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

sidebar image

Power Grid Corp: Netting a Powerful Grid

10 Nov 2023 , 10:30 AM

Power Grid (PWGR) expects Rs1.8-2tn investment opportunity in the base case, through FY32; material acceleration in projects is seen >FY26; until then the target is to complete Rs100-190bn projects pa, which should lead to a steady 5-6% pa standalone/ consol earnings growth. Valuations are reasonable. BUY. 

Upbeat on growth:

PWGR during the analyst meet stated that -1) National Committee on Transmission will shortly award Rs600bn projects, and follow up with balance Rs1.1tn over the next 3-4 years (evacuation of RE projects); pick up in thermal project awards would necessitate further investments in transmission systems; 2) on conservative estimates it sees an opportunity to invest Rs1.8-2tn over FY32 including international projects; 3) work on data centres is yet to start, while orders for smart meters are placed; 4) FY24/25ii capex target is Rs100bn/150bn; capitalisation is seen at ~Rs100/170bn; 5) transfer of assets to INVIT is not anticipated (change in guidelines). 

Earnings acceleration seen >FY26: 

Through FY24-26, analysts of IIFL Capital Services forecast PWGR to register 5%/6% pa standalone/consol PAT growth, on the back of Rs90-190bn pa project completion and an unchanged regulatory framework. PWGR expects CERC to publish draft regulations sometime in December-23. The earnings will likely see pickup post FY26, as the investments/capitalisation towards RE projects commercialise. In the base case analysts of IIFL Capital Services think, PWGR is well placed to complete Rs200-250bn projects >FY26, which compares favourably with ~Rs180bn average seen through FY17-23; the share of TBCB projects in overall balance sheet should rise progressively thereby diluting regulatory risk. 

Reasonable valuations: 

PWGR should sustain its return ratios above industry average through FY26; the cash flows should be strong at Rs380-390bn p.a., well ahead of its proposed capex; as such D/E is comfortable at 1.3x and to that extent the stock valuations are not demanding at 12x FY25 P/E and ~2x FY25 BV; material improvement in payout ratio is not anticipated (already at 67%), given the growth opportunity. That said, analysts of IIFL Capital Services see the stock awaiting clarity on the upcoming regulations, for further re-rating. Maintain BUY.

Related Tags

  • Power Grid Corp
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More
Knowledge Center
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Capital Services Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Loading...

Follow us on

facebooktwitterrssyoutubeinstagramlinkedintelegram

2025, IIFL Capital Services Ltd. All Rights Reserved

ATTENTION INVESTORS

RISK DISCLOSURE ON DERIVATIVES

Copyright © IIFL Capital Services Limited (Formerly known as IIFL Securities Ltd). All rights Reserved.

IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)

ISO certification icon
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.