Buy Power Grid Corporation Ltd for Target Rs. 356 by Elara Capitals
Capex met; miss on capitalization
In Q4FY25, Power Grid Corporation (PWGR IN) revenue from operations rose 2% YoY to INR 123bn, driven by robust growth in consultancy, up 120% YoY to INR 5.2bn, and telecom, up 21% YoY to INR 3bn, while transmission revenue remains flat at INR 117bn. EBITDA increased 1% YoY to INR 102bn, but PBT (pre-regulatory income) declined 5% YoY to INR 50bn due to a 4% drop in Other income. Reported PAT fell 1% YoY to INR 41bn. Capex surged 79% YoY in Q4 to INR 86bn and more than doubled to INR 262bn for FY25, although Q4 capitalization dropped 13% YoY to INR 16bn, dragged by supply-side issues, manpower constraints, and delay from the General Elections. In FY26, FY27 and FY28, capex guidance stands at INR 280bn, INR 350bn, and INR 450bn, respectively, with a capitalization target of INR 230bn for FY26. Work-in-hand reached INR 1,547bn, including INR 96bn in ongoing regulated, INR 372bn in new regulated, and INR 1,050bn in tariff-based competitive projects (TBCB) projects. TBCB project wins were INR 920bn in FY25 while the current pipeline includes INR 430-460bn of projects, with INR 340bn under bidding. We retain Buy with a TP of INR 356.
Top line increases 2% YoY in Q4FY25: Revenue from operations increased 2% YoY to INR 123bn. Revenue from the transmission segment was stagnant at INR 117bn. Revenue from consultancy surged 120% YoY to INR 5.2bn and revenue from telecom rose 21% YoY to INR 3bn. EBITDA increased 1% YoY to INR 102bn. Other income decreased 4% YoY to INR 3.2bn. PBT before adjusting for regulatory income declined 5% YoY to INR 50bn. Tax fell 4% YoY to INR 9.2bn. Reported PAT was down 1% YoY to INR 41bn.
Capex rises 79%YoY; however, capitalization declines 13% YoY: Capex increased 79% YoY to INR 86bn. Capex more than doubled to INR 262bn for FY25. Capitalization was muted for Q4FY25, down 13% YoY to INR 16bn; however, capitalization increased 18% YoY to INR 90bn in FY25. It had planned a capitalization of INR 160-170bn in FY25; however, it was unable to meet this target on supply-side issues, unavailability of skilled manpower and further delay caused by elections. It has kept a capitalization target of INR 230bn in FY26. It has earmarked a capex of INR 280bn for FY26, INR 350bn for FY27 and INR 450bn for FY28.
Work-in-hand projects: Work-in-hand rose to INR 1,547bn, including ongoing regulated projects worth INR 96bn, new regulated projects at INR 372bn and TBCB projects at INR 1050bn. Gross fixed assets stood at INR 2,907bn and capital work in progress at INR 363bn. It has won TBCB worth INR 920bn in FY25. Currently, it has INR 460bn projects in pipeline, of which INR 340bn projects are in the bidding stage.
Retain Buy with a TP of INR 356: PWGR is a play on growing investment in the power sector. The company has set an ambitious capex target of INR 3tn until FY32. We believe it will hold a huge market share in the upcoming TBCB projects. We retain Buy with a TP of INR 356, valuing regulated projects at 3.0x FY27E P/B, consultancy projects at 10x FY27E P/E and TBCB projects at 3.0x FY27E P/B. We introduce FY28 estimates
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SEBI Registration number is INH000000933
