Power Grid shares gain as JP Morgan sees 18% upside in stock

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February 23, 2023
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Power Grid | CMP: Rs 216.15 | The share price ended in the green on February 20. Power Grid Corporation of India has been declared as the successful bidder under tariff based competitive bidding to establish inter-state transmission system for various projects on build, own operate and transfer (BOOT) basis.

Shares of Power Grid Corporation of India gained on February 23 with JP Morgan’s upbeat outlook for the company. The foreign brokerage firm has an ‘overweight’ rating on shares of Power Grid and a target price of Rs 255, which implies an 18 percent upside from today’s high of Rs 215.75.

At 10:52am, shares of the power transmission company were trading 0.4 percent higher at Rs 215.35 on the BSE.

In the past one month, the scrip has been down 5 percent, while in the past three months and year-to-date, the share price movement has been quite unexciting. However, the stock offers a good dividend yield which is why several investors prefer Power Grid.

India’s power demand growth and recurring spikes in deficit will drive an upcycle in capital expenditure. Plus, electrification can result in growth multiple of greater than 0.9 times GDP of the past, said JP Morgan.

The generation capacity target is to grow at 10 percent compounded annual rate to meet the demand, which has warranted an upgrade to inter-state transmission capex plan to $30 billion till FY30, the foreign brokerage firm said, adding that the capex plan will integrate the increase in renewable generation.

The growth of renewable energy generation is seen propelling transmission investments.

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Additionally, if thermal increases or storage falls short, grid investment will increase further, JP Morgan highlighted.

The company has works in hand worth about Rs 47,000 crore, it had said in its earnings conference call.

Power Grid is India’s largest electric power transmission utility. It is a ‘Maharatna’ Central Public Sector Enterprise with 51.34 percent stake held by the government and operates around 86 percent of India’s inter-regional transmission network.

Listed in 2007, the company has three business segments – transmission, telecom and consultancy – with transmission segment being the main focus of the business. The management is also identifying and evaluating opportunities in the non-transmission segment for growth.