Motilal Oswal is bullish on Power Grid has recommended buy rating on the stock with a target price of Rs 231 in its research report dated January 31, 2019.
Motilal Oswal's research report on Power Grid
Power Grid’s (PWGR) PAT increased ~14% YoY to INR23.3b in 3QFY19, broadly in line with our estimate. PAT adjusted for the prior period and the impact of wage revision was up ~9% YoY to INR23.6b (+9.2% YoY for 9MFY19). Receivables have nearly doubled in nine months to INR70.6b, as beneficiaries are delaying payments. Standalone capitalization stood at ~INR127b in 9MFY19 (INR68.6b in 3Q), as against ~INR195b in 9MFY18. The company also capitalized ~INR39b of TBCB projects during the year. PWGR guided for capitalization of INR260b for FY19 (incl. INR60b for TBCB projects). Capex stood at ~INR182b for 9MFY19. Telecom revenue/EBIT increased 13%/38% YoY to INR2.0b/INR1.1b in 3QFY19. Consultancy revenue increased 9% YoY to INR1.6b, but EBIT declined 15% YoY to INR0.7b in 3QFY19. Transmission revenue/EBIT grew ~13/11% YoY, along with 12% growth in derived PAT. Adj. PAT growth though was lower at ~8% YoY (adj. for prior period and wage impact) for 3QFY19. Management highlighted that the government has envisaged transmission projects of ~INR433b. Of these, ~INR160b are to be bid out in the next one year.
Outlook
The stock is trading at a dividend yield of ~10-12% for an assured return model and state-backed revenues (g-sec yield is ~7 to 8%). Maintain Buy.
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