Power Grid Corp, NTPC gain 3% each to hit their respective 3-month highs

Power Grid has been declared a successful bidder to establish inter-state transmission system for two projects on build, own operate and transfer (BOOT) basis, in Chhattisgarh.

Shares of state-owned power transmission company Power Grid Corp and power generation company NTPC hit their respective over three-month highs on gaining 3 per cent each on the BSE in Monday’s intra-day trade.

At 12:25 pm; Power Grid Corporation was up 3 per cent to Rs 228.70 as the company was declared a successful bidder to establish inter-state transmission system for two projects on build, own operate and transfer (BOOT) basis, in Chhattisgarh. The company has received letters of intent for the two projects on March 2.

The first project comprises of establishment of 400kV D/C transmission line passing through the state of Chhattisgarh and bays extension works at 2 existing sub-stations. The second project comprises of bays extension works including creation of 220kV voltage at 2 existing sub-stations in the state of Chhattisgarh.

The stock of Power Grid Corporation is trading at its highest level since November 2022. It had hit a 52-week high of Rs 248.25 on May 10, 2022.

According to analysts at Emkay Global Financial Services, the company’s earnings growth is expected to considerably moderate for FY24/FY25, owing to commissioning of Rs 100 billion each in FY23 and FY24 at a consolidated level. Over the medium term, Power Grid is expected to register a 5 per cent EPS CAGR, with a dividend yield of 7 per cent. Power Grid remains a low risk, moderate-return profile utility, the brokerage said in its December quarter (Q3FY23) result update.

Those at ICICI Securities said that Power Grid has been a steady performer on account of strong asset addition in FY16-20. With relatively small sizes of renewable projects, growth rate will taper down for the stock supported by decent dividend yield but the same has been discounted while new business initiatives will take time to show results.

Meanwhile, shares of NTPC hit their highest level since November 2022 to Rs 177.45 on the BSE in the intra-day trade. It had hit a 52-week high of Rs 183 on November 1, 2022.

The management has guided to commercialise 5GW/7.3-8GW/4GW of capacities in FY22/FY23/ FY24 that would drive a 10 per cent CAGR in standalone regulated equity over FY21-24; Renewable Energy (RE) capacity target of 3.5 GW in the next two years. The management targets to reduce fixed cost under recovery to Rs 350 crore by March 2023 as compared to Rs 650 crore in 9MFY22.

NTPC plans to monetise RE assets through an IPO or induction of strategic investors which would help to unlock value. The company has awarded a project of “Standalone Fuel-Cell based Microgrid with hydrogen production using electrolysers. 

"NTPC’s risk-averse regulated business model provides earnings growth visibility/RoE improvement and RE expansion would drive gradual re-rating of the stock as it would allay concerns on the ESG front. Additionally, potential monetisation of its RE and power trading subsidiaries could further improve shareholders’ returns in the coming years", ICICI Securities said. The stock, however, is trading above its target price of Rs 170 per share.

According to reports, the Power Ministry will soon float a tender to facilitate procurement of 4,000 MW of gas-based electricity from companies other than NTPC Ltd for around 20 days between April and May to meet an anticipated increase in demand. The ministry will appoint NTPC Vidyut Vyapar Nigam Ltd (NVVN) as the agency to facilitate the purchase from the companies and sale in the market.