Buy Power Grid Corporation Ltd For Target Rs.360 By Elara Capital
Strong execution, FY26 guidance up
We attended PGCIL’s business update webinar where the company has revis ed up FY26 capex guidance to INR 350bn from INR 320bn and capitali zation to INR 250bn from INR 220bn , signalling strong operational delivery . T he opportunity pipeline remains healthy , with the Central Electricity Authority (CEA ) estimat e of ~ INR 7.9tn transmission investment un til FY36 . This is further bolstered by ~ INR 4tn from Brahmaputra basin hydro evacuation and ~ INR 3tn from international high -voltage direct current (HVDC ) interconnections , aggregating to ~ INR 15tn opportunity. We retain our Buy rating with a higher TP of INR 360 based on a SOTP valuation .
Capex revised up to INR 350bn for FY26: Execution momentum has been strong in FY26. Management has revised capex target to INR 350bn for FY26 from INR 320bn. Capitalization guidance has been revised up to INR 250bn from INR 220bn. Management has set a capex target of INR 370bn for FY27 and INR 450bn for FY28. Capitalization is set at INR 300bn for FY27 and INR 350bn for FY28 . For the past five years, P GCIL has executed capex of INR 1tn and capitalized assets worth INR 900bn, resulting in an asset CAGR of ~ 10% and gross fixed assets of > INR 3tn in FY26. Total work in hand stands at ~ INR 1. 5tn and CWIP at INR 490bn .
Robust transmission opportunity: CEA has outlined a transmission investment requirement of ~ INR 7.9tn up to FY36. CEA e xpects renewable capacity to reach 786GW by FY36. In addition , the Brahmaputra basin hydro evacuation projects contribute another ~ INR 4tn opportunity, supported by significant untapped hydro potential in the Northeast. Further, international HVDC interconnections under initiatives ,such as cross -border grid integration , add an estimated ~ INR 3tn opportunity. T hese segments aggregate to a total transmission investment opportunity of ~ INR 15tn in the next decade , providing sizeable long -term growth visibility .
SPV consolidation: The company is undertaking structural simplification through special purpose vehicle (SPV ) consolidation, with 19 SPV already merging into two entities and plans to merge an additional 28 subsidiaries. It is aimed at improving governance and administrative efficiency .
Retain Buy with a higher TP of INR 360: PGCIL remains a direct beneficiary of the sustained investment upcycle in the power sector. Execution momentum has strengthened, with management upgrading capex target . We expect the company to secure a dominant share of upcoming TBC B projects . Accordingly, we retain our Buy rating and raise our target price to INR 360 from INR 339 after factoring in ~INR 15tn transmission opportunity, where PWGR could capture ~50% market share. Our SOTP valuation is based on 2. 5x (Unchanged) FY28E P/B for regulated assets, 10 .0x (unchanged) FY28E P/E for consultancy, and 2. 0x FY28E P/B for TBCB projects. We retain our estimates.
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SEBI Registration number is INH000000933
