Buy Power Grid Corporation of India Ltd For Target Rs. 356 By Elara Capital Ltd
Subdued Q3
Power Grid Corporation of India (PWGR IN) Q3FY25 revenue declined 3% YoY to INR 112bn, with EBITDA falling 7% YoY and margin contracting to 85% from 91% YoY. While Other income surged 89% YoY to INR 5bn, regulatory income dropped 62% YoY to INR 425mn. PBT grew 4% YoY to INR 49bn, but higher taxes, up 38% YoY, led to a 4% YoY decline in PAT to INR 39bn. The company has set a capex target of INR 230bn and a capitalization goal of INR 180bn for FY25, with significant allocation for regulated and tariff based competitive bidding projects. In Q3FY25, it achieved a capitalization of ~INR 34.2bn, up 92% YoY, and incurred a capex of ~INR 76.5bn, up 122% YoY. Work-in-hand projects increased to INR 1,437bn, including regulated and TBCB projects while gross fixed assets stood at INR 2,888bn with INR 296bn in capital work in progress. We reiterate Buy with a lower TP of INR 356.
Top line declines 3% YoY, PAT down 4% YoY:
PWGR reported a 3% YoY decline in revenue to INR 112bn. EBITDA fell 7% YoY to INR 95bn. EBITDA margin contracted to 85% in Q3FY25 vs 91% YoY in Q3FY24.Other income increased 89% YoY to INR 5bn. PBT rose 4% YoY to INR 49bn. Tax surged 38% YoY to INR 11bn. Regulatory income fell 62% YoY to INR 425mn. Reported PAT dropped by 4% YoY to INR 39bn.
Capex and capitalization target for FY27:
PWGR has set a capex and capitalization target of INR 230bn and INR 180bn, respectively, in FY25. Of total capex target of INR 230bn, INR 39bn is earmarked for RTM projects and INR 142bn for TBCB projects. It has achieved a consolidated capitalization of ~INR 34.2bn in Q3FY25, up 92% YoY. It has incurred a capex of ~INR 76.5bn in Q3FY25, up 122% YoY.
Price chart
Source: Bloomberg
Work-in-hand projects:
Work-in-hand rose to INR 1,437bn, including ongoing regulated projects worth INR 83bn, new regulated projects at INR 385bn and TBCB projects at INR 936bn. Gross fixed assets stood at INR 2,888bn and capital work in progress at INR 296bn.
Retain Buy with a lower 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 lower TP of INR 356 from INR 384, valuing regulated projects at 3.0x (unchanged) FY27E P/B, consultancy projects at 10x (unchanged) FY27E P/E and TBCB projects at 3.0x (unchanged) FY27E P/B. We revise down our TP on account of the delay in project commissioning
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SEBI Registration number is INH000000933
