PowerGrid stock spikes 4% on ‘outperform’ rating from Bernstein

Shares of Power Grid Corporation, India’s largest electric power transmission company, surged 4 percent on February 20, a day after the company’s board approved Rs 656-crore investment for the implementation of electricity transmission projects in the country, and Bernstein initiated an ‘outperform’ view on the stock with a target of Rs 315.

Bernstein is of the view that capex at the company will see an increase over the next two years and is estimated at 30 percent. The new growth areas for the state-utility major are interstate transmissions, batteries and smart meters.

The international brokerage also mentioned that the company has access to steady cash from existing assets and low cost of debt. The regulatory support augurs well for the company, it said.

At 12:27pm, the Power Grid stock was trading at Rs 288.15 on the National Stock Exchange (NSE), just shy of its 52-week high of Rs 289.40, hit earlier this month (February 5).

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According to the company filing, the Board of Directors approved the implementation of Unified Load Dispatch and Communication (ULDC) Phase-III (SCADA/EMS Upgradation Project –Northern Region SLDCs) at an estimated cost of Rs 514.66 crore with a commissioning schedule of November 15, 2025.

Additionally, the Committee of Directors on Investment on Projects approved the augmentation of a 765/400 kV, 1500 MVA transformer (4th) at Bhiwani at an estimated cost of Rs 141.09 crore, scheduled to be commissioned by May 5, 2025.

Power stocks have rallied in the past three months, with the BSE Power index rising around 50 percent, and both public and private sector utilities showing strong gains.

Jefferies recently said power stocks are set to benefit from rising power demand in the country on the back of an increase in temperature in the summer months.  The international brokerage has a ‘buy’ call on the PowerGrid stock with a target price of Rs 270 apiece.

At the current levels, the Maharatna Central Public Sector Undertaking (CPSU) stock is trading above the brokerage’s target price.

BoB Capital has increased the PowerGrid stock’s target price to Rs 320 per share from Rs 250 earlier, stating that the new target price, although raised, remains conservative in comparison to its private sector counterparts.

The brokerage asserts that power company justifies this valuation multiple due to its superior return on equity (ROE) ranging from 15 to 19 percent, accompanied by a healthy dividend yield and a low-risk profile.

Also Read | Power Grid Corporation board approves investments of Rs 656 crore

Power Grid Corporation shares soared 78 percent in the last one year, outperforming benchmark Nifty 50 which has risen 23 percent during this period.

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