Buy Power Grid Corporation; target of Rs 220: Emkay Global Financial

Emkay Global Financial's report on Power Grid Corporation

PGCIL’s asset capitalization in Q2FY21 increased by 153.2% yoy to Rs106.9bn, led by the commissioning of the first phase of the Raigarh-Pugalur HVDC project during the quarter. Capex, however, declined 14.4% yoy to Rs31bn vs. our estimate of Rs25bn. Revenue grew 4.3% yoy to Rs90.6bn, owing to 6.3% growth in the Transmission business, while revenue from Consulting/Telecom businesses fell 37.6%/4.3 yoy. EBITDA rose 5.5% yoy to Rs79.7bn, while margins improved 99bps yoy to 88.0% due to lower other expenses. Management has retained its FY21 capex and capitalization guidance of Rs105bn and Rs200- 250bn, respectively. We expect capitalization of Rs200bn in FY21 (another Rs82bn in H2FY21 related to the pending work of Raigarh-Pugalur HVDC project) and ~Rs173.3bn for FY22.

Outlook

PGCIL has total projects worth Rs410bn in hand and ~Rs179bn of projects are likely to be bid in H1FY21. We have maintained our estimates and TP of Rs220. Retain Buy on strong cash flow, high dividend yield of 6% and InvIT proposal to be executed in Q4FY21E.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More