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Motilal Oswal Places A “Buy” Call On Stock Of Power Grid
Broking firm Motilal Oswal has placed a "buy" call on the stock price of Power Grid, with a price target that is higher by 25 per cent.
The broking firm has set a target price of Rs 221 on the stock as against the current market price of Rs 177, implying an upside potential of at least 25 per cent.
Maintains capitalization and capex guidance for FY21
"Power Grid has maintained its FY21 capex and capitalization targets of Rs 105 billion and Rs 200-250 billion, respectively. As per the co., it plans to commission Bipole-I of Raigarh Pugalur in the current quarter. Receivables increased to Rs 8.2 billion in Jun'20 (from Rs 4.9 billion in March 2020). Conversely, they reduced to Rs 7.5 billion in Jul'20. Collection efficiency increased June onward and came in at >100% for June and July. Rs 12.4 billion has been received under the Atmanirbhar scheme," Motilal Oswal institutional Equities has said in its report.
Valuations do not price any growth benefits
"Power Grid (PWGR)'s result highlights the impact of rebate (Rs 10.75b), with reported S/A PAT declining 18.5% YoY to INR28.1b. Adjusted for the same and prior-period revenue, PAT was up 21% YoY. Rs 234 billion worth of awards would be bid out under various schemes, but we expect some delays. In this context, a declining order book does present the risk of growth slowdown.
However, valuations at 1.3x FY22E P/BV and 9% FY22E dividend yield remain attractive for a company with steady RoEs of 17%. Maintain Buy, with DCF-based target price of Rs 221 per share," the broking firm has stated in its report.
