We believe Projects worth Rs660bn in hand imply good earnings visibility. We expect PGCIL to deliver 13% earnings growth over FY19–21E. The stock is trading reasonable valuations of 1.6x/1.5x FY20/21E P/BV. The stock also offers 4% dividend yield. We maintain our BUY rating with TP of Rs224.
Given the competitive intensity in the bidding, the IRR of the TBCB projects will be lower than earned on a regulated project. This will impact the return ratios in the long run given the change in nature of awarding projects. Also, lower capitalisation rate and capex trends will lead to 7% PAT CAGR in FY19- 21 vs. 22% PAT CAGR in FY15-18. This will also weigh on multiple expansion. Hence, we continue to value the stock at a P/BV multiple of 1.3x FY21E BV and arrive at a fair value of Rs 210/share.
We expect company to announce higher dividend payouts (45% in FY19 vs 35% in FY18) due to lower capex guidance. The stock is currently trading at 1.7x/1.6x FY20/21E P/Bv. We are positive on the company due to 1) Only Power utility to report higher RoE (16-18%) on consistent basis, 2) Immune from any fuel related issue 3) Dividend yield of 4-4.7%. We maintain BUY rating with TP of Rs224 (implied multiple is 1.6x FY21 BV).
Inline Q1, good defensive stock; Maintain Buy PGCIL’s Q1FY20 results were in line with our estimates. The capex was 29bn and capitalization was 14.7bn in Q1. PGCIL is a good defensive stock, with growth built in by the strong capitalization, which has reached a peak in recent years. This should lead to stronger cash flows. It has maintained capex and capitalization guidance given in the beginning of the year. We maintain a Buy rating, with a TP of 245, at a valuation of P/BV 1.7x FY20E
We feel investors could buy the stock at the CMP Rs 206.7 (1.4x FY21P/BV) and add on dips to Rs185-190 band (1.3x FY21P/BV) for sequential targets of Rs 230 (1.6x FY21P/BV) and Rs 244 (1.7x FY21P/BV) over the next 3-4 quarters.
Valuation attractive, Maintain Buy…Outlook & Valuations... PWGR’s capitalization target of Rs200-250bn for FY20 could see some slippages as it is subject to timely commissioning of the Raigarh-Pugalur HVDC project where there is risk of delays due to right-of-way issues. This could lead to slower growth in FY20. While new transmission projects have slowed down in recent years, we believe there is a huge scope for long-term growth, driven by demand, renewables, increased requirement of flexibility and efficiency in the market. We maintain our Buy rating and value at 1.3x FY21E P/BV with a target price of Rs 221.
We have modelled Capitalization of Rs130bn/Rs150 bn for FY20/21E and expect earnings to grow at CAGR of 7% over the next two years (FY19-21E). The stock is currently trading at 1.5x/1.3x FY20/21E P/Bv. We maintain BUY on the stock with TP of Rs224 (implied multiple is 1.6x FY21 BV). We are positive on the company due to 1) Only Power utility to report higher RoE (16-18%) on consistent basis, 2) Immune from any fuel related issue 3) Dividend yield of 4-4.5%.
Moderation across future capex, rising share of competitively bid projects will impact the earnings performance and investment multiple that the company used to enjoy over the last years. We now forecast 7% PAT CAGR over FY19-21E and cut our P/B multiple at 1.3x FY21E BV. We have a fair value of Rs 210 per share.