MOSL: POWER GRID CORP (Buy)-In line on strong transmission segment growth
Power Grid Corp: In line on strong transmission segment growth
(PWGR IN, Mkt Cap USD13.8b, CMP INR188, TP INR229, 22% Upside, Buy)
Valuation not pricing in any growth benefits; Maintain Buy
- Power Grid’s (PWGR) 3QFY20 results highlight the company’s strong performance in the transmission segment, with adj. PAT increasing 13% YoY. FY20 commissioning target though would be dependent on timely commissioning of the Raigarh-Pugalur (~INR90b) project.
- While declining order book and capitalization schedule does put risk of a slowdown in growth, valuations at 1.3x FY22E P/BV and ~7% dividend yield are attractive for a company with steady RoEs of ~17%. Maintain Buy with a DCF-based TP of INR229/share.
Core transmission growth strong
- for prior period revenue and pay commission provisions, S/A PAT grew 13% YoY to INR26.5b (4% higher than our est.) on better performance of the transmission business.
- Core transmission grew ~14% YoY v/s. est. regulated equity growth of 9% YoY, indicating better transmission RoEs YoY for the quarter.
- Telecom segment displayed subdued 4% YoY growth while profitability for the Consultancy segment declined 11% YoY.
- Overall, capitalization for the quarter stood at ~INR52b while capex was at ~INR40b.
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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