Sharekhan's research report on Power Grid Corporation of India
Q2FY23 standalone PAT grew by 9.4% y-o-y to Rs. 3,651 crore (in-line) led by lower tax rate of 9.4% and higher interest from subsidiaries/JVs offsetting muted asset capitalisation and lower surcharge income. Standalone/consolidated asset capitalisation was muted at Rs. 1,697 crore/Rs. 3,133 crore; down 81%/76% y-o-y. However, we expect capitalization to pick-up in H2FY23 given full year guidance of Rs. 13,000 crore. Receivables rose by 16% q-o-q to Rs. 6,777 crore. The company raised asset capitalisation guidance to Rs. 13,000 crore (versus Rs. 11,000 crore earlier) and expects capex to pick-up to Rs. 12,500 crore in FY25 versus ~Rs. 8,800 crore for FY23. Power Grid has projects worth Rs. 45,700 crore that provides decent earnings growth visibility. The company maintained its asset monetisation target at Rs. 6600 crore for FY23 and would increase dividend payment in absence of significant capex.
Outlook
We maintain a Buy on Power Grid with an unchanged PT of Rs. 265 as valuation of 1.7x/1.5x FY24E/FY25E P/BV seems attractive given expectation of 11% PAT CAGR over FY22-25E, RoE of 18-19% and a dividend yield of ~6-7%.
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