Intensified Government Focus, Buy This Maharatna Power Stock For 15% Returns: HDFC Securities

HDFC Securities, a renowned brokerage firm has given a buy call to the stocks of Power Grid Corporation of India Ltd. (PGCIL), with a Target Price of Rs. 234.50. PGCIL is free cash flow positive, has a consistent pay-out ratio of 50%+, and yields ~6% dividend yield. It has initiated the process of monetizing its regulated assets. While Renewable energy evacuation and intra-state network enhancement will provide transmission Capex opportunities, smart metering and power storage can help restart the growth cycle. "Maharatna"

Target Price

The Current Market Price (CMP) of PGCIL is Rs. 204. HDFC Securities has estimated a Target Price for the stock at Rs. 234.50. Hence this company is expected to give a 14.95% return, in 6 months

Stock Outlook
Current Market Price (CMP)	Rs. 204
Target Price	Rs. 234.50
6 months returns	14.95%

Company performance

Power Grid Corporation's total revenue stood at Rs. 37665.7 crore, which is expected to grow to Rs. 41169.1 crore, in FY 22. The company's EBITDA stood at Rs. 33055.9 crore, which is expected to grow to Rs. 35973.9 crore. In Q2FY22, revenue grew by 9.6% YoY to Rs. 9929.2 crore. In H1FY22, consolidated revenue grew 6% at Rs. 20,906 crore and PAT came in at Rs. 9,375 crore, up by 82%. Outstanding dues have been reduced by 23.5% YoY, and ~40% in the last 3 quarters. The debt-equity ratio during the quarter pared down to 1.7 vs 2.1.

Comments by HDFC Securities

HDFC Securities said, "India's move to expand its renewable power capacity to ~450 GW by 2030 (versus only 103 GW currently) and National Infrastructure Pipeline Capex target for power transmission at Rs. 3 lakh crore (Power Grid's share at Rs. 65,500 crores) over FY20-25E provides enormous growth opportunities to expand both interstate and intra-state power transmission lines. Steady growth in asset capitalization provides earnings growth visibility given regulated RoE business model."

About the company

Power Grid Corporation of India Ltd. is engaged in the power transmission business, with responsibility for planning, implementation, operation, and maintenance of Inter-State Transmission System and operation of National and Regional Load Dispatch Centers. The Company's segments include Transmission, Telecom, and Consultancy. The Consultancy segment includes planning, design, engineering, load dispatch, procurement management, operation and maintenance, financing, and project management. The Telecom segment includes transmission infrastructure, enterprise services, and topologies.

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.