MOSL: POWER GRID (Buy)-Steady growth in underlying Transmission numbers
POWER GRID: Steady growth in underlying Transmission numbers
(PWGR IN, Mkt Cap USD16.5b, CMP INR176, TP INR205, 16% Upside, Buy)
Steady growth coupled with higher payouts; maintain Buy
- PWGR's 1QFY22 result highlights the steady growth in its Transmission business, with underlying numbers increasing 12% YoY. Reported standalone PAT rose 3x YoY, led by gains on sale of assets to the InvIT.
- It has won INR90-100b of awards during the past 8-9 months, which is a positive sign, given a declining order book. The capex trajectory is on a decline, and with proceeds from InvIT, we see strong scope for higher dividends. Valuations at 1.6x FY22E P/BV and a 7-8% FY22E dividend yield remain attractive for a company with a steady RoE of 18%. We maintain our Buy rating with a DCF-based TP of INR205/share.
Profit boosted by sale of assets; underlying numbers see steady growth
- Standalone PAT rose 3x YoY to INR60.8b due to one-offs related to: a) INR31.7b gain from the sale of assets to InvIT, b) INR2.3b of income - difference in final and provisional tariff, and c) INR10.8b impact of a rebate in 1QFY21.
- Adjusted for prior period sales and above one-offs, PAT stood at INR29.6b (in line with our estimate of INR30.2b).
Other income fell 19% YoY to INR5.1b, amid lower late payment surcharge income and partly offset by higher dividend from subsidiaries and JVs. Late payment surcharge declined to INR0.6b (v/s INR2.65b in 1QFY21). Dividend from subsidiaries and JVs was higher at INR0.7b v/s INR0.2b in 1QFY21.
Power Grid Corp. of India is a power transmisson utilities company. Co. is engaged in the planning, coordination, supervision and control over inter-state transmission system and operation of national & regional power grids. Co.'s Power System Management business takes continuous action regarding operation and maintenance to seek to ensure compliance with prescribed standards as well as to achieve high availability of the system. In the telecom business, Co.'s brand name "POWERTEL" is the only utility in India having an overhead optic fiber network using optical ground wire on power transmission lines.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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