Power Grid Corporation of India: Energizing Your Investment Portfolio with Sharekhan’s Recommendation

In the dynamic world of investments, identifying opportunities with a promising future is essential. In this article, we explore the research report by Sharekhan, a respected name in the financial industry, regarding the Power Grid Corporation of India. Sharekhan’s report, dated September 7, 2023, not only recommends a buy rating on this stock but also sets a target price of Rs 290. Let’s delve into why Sharekhan is bullish on the Power Grid Corporation of India.

Power Grid Corporation of India Meeting India’s Renewable Energy Ambitions

Renewable Energy Expansion: India’s ambitious goal to expand its renewable energy (RE) capacity to approximately 500GW by 2032 is a significant driver for the Power Grid Corporation of India. Achieving this target will require substantial investment in transmission infrastructure.

Addressable Market: Power Grid Corporation envisions a substantial addressable market, estimating its transmission capital expenditure (capex) at Rs. 1.71 lakh crore up to 2032. It anticipates capex revival to the tune of Rs. 20,000-25,000 crore, starting from FY25-26. This projection underscores the company’s optimism and its role in supporting India’s renewable energy journey.

Diversifying Earnings and Creating Long-Term Value

Exploring New Opportunities: Power Grid Corporation is not limiting itself to traditional transmission operations. Instead, it’s focusing on new opportunities in the power value chain. Initiatives like smart meters, smart grids, and energy storage are on the horizon.

Smart Metering: Smart metering, in particular, is gaining traction. Power Grid has secured an order to install 69 lakh smart meters for Gujarat discoms, involving an investment of Rs. 4067 crore. This move not only aligns with the industry’s evolution but also showcases the company’s adaptability and forward-thinking approach.

Strong Growth Prospects

Robust Work in Hand: With a work in hand worth Rs. 48,700 crore, a large transmission bid pipeline, and a regulated Return on Equity (RoE) model, Power Grid Corporation offers healthy earnings growth visibility. There’s also potential for upside in earnings estimates if transmission capex accelerates.

Outlook and Conclusion

In conclusion, Sharekhan maintains its Buy rating on Power Grid Corporation of India, with an unchanged price target of Rs. 290. This valuation is based on 1.7x FY2025E Price-to-Book Value (P/BV), offering an attractive proposition.

Compelling Factors: Sharekhan’s confidence in Power Grid Corporation is underpinned by a promising growth outlook, a healthy RoE of 19%, and an appealing dividend yield of approximately 6%.

As you navigate the intricate world of investments, consider the Power Grid Corporation of India as a cornerstone of your portfolio. With its pivotal role in India’s renewable energy expansion, diversification efforts, and strong growth prospects, this stock has the potential to energize your investment journey.

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