Power Grid slips despite order win to establish inter-state transmission system

Shares of Power Grid Corporation of India seem to have overlooked the announcement that the company has been declared as the successful bidder under a Tariff Based Competitive Bidding. The stock has risen around three percent this week and investors seem to have been taking some money off the table. At 9:34 am, shares of the company were trading 0.7 percent lower at Rs 220.65 on the BSE.

The bidding is to establish Inter-State Transmission System for the establishment of Khavda Pooling Station-3 in Khavda RE Park on build, own operate and transfer (BOOT) basis. The scope of the project also comprises of the establishment of a new 765/400kV GIS Substation, 765kV Direct Current Transmission Line and associated works in the state of Gujarat.

Power Grid has projects in the hand of Rs 47,600 crore with ongoing projects of Rs 7,600 crore, new projects of Rs 27,000 crore and Tarrif Based Competitive Bidding projects of Rs 13,000 crore, Sharekhan said.

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It added that asset monetisation delays are disappointing, but the management hinted at maintaining a dividend payout ratio of 60 percent.

The brokerage firm has maintained a buy rating on the stock with an unchanged target price of Rs 265 as valuation of 1.6 times and 1.4 times its FY24 and FY25 Price to Book Value seems attractive given expectation of 10 percent compounded annual growth in net profit over FY22-25, Return on Equity of 18 percent and a dividend yield of around 6-7 percent.

Ashwini Agarwal of Demeter Advisors believes it is time to look for dividend yield stocks and utilities companies where stock valuations appear attractive.

Meanwhile, JPMorgan has an overweight rating with a target at Rs 255 per share. It believes that the generation capacity target is to grow at 10 percent compounded annually to meet demand, which has warranted an upgrade to inter-state transmission capex plan to $30 billion till FY30.