PowerGrid hits record high, gains 4%; stock has rallied 18% in last 3 weeks

Shares of PowerGrid Corporation hit a record high of Rs 214.80, up 4 per cent on the BSE in Thursday as robust project pipeline provides earnings visibility for 2-3 years for the company. The stock of state-owned electric utilities company surpassed its previous high of Rs 209.75 touched on October 18, 2021.

In the past three weeks, PowerGrid has outperformed the market by surging 18 per cent, as compared to 1.8 per cent decline in the S&P BSE Sensex. The company commissioned entire Raigarh-Pugalur 6,000 MW HVDC System on October 25, 2021.

For July-September quarter (Q2FY22), the company’s standalone profit after tax (PAT) increased by 7 per cent year on year (YoY) to Rs 3,338 crore, due to lower-than-expected surcharge income at Rs 89 crore (versus Rs 220 crore in Q2FY21). However, consolidated Q2FY2022 asset capitalisation was strong at Rs 7,633 crore as compared to Rs 5,642 crore in Q1FY22 and Rs 10,709 crore in Q2FY21.

Sharekhan has a ‘Buy’ rating on PowerGrid with target price of Rs 217 per share. The management has raised its asset capitalisation guidance to Rs 17,000-20,000 crore for FY22 and guided for Rs 12,000-15,000 crore for FY23E. Thus, we expect PAT CAGR of 12 per cent over FY21-24E with a RoE of around 19.3 per cent in FY24E, the brokerage firm said.

PowerGrid has a robust project pipeline worth Rs 27,500 crore and has capitalised around Rs 22,932 crore in the last four quarters, which provides earnings visibility for 2-3 years.

“The slower-than-expected capitalisation of projects (due to delayed project execution amid COVID-19). Inability to win new projects under tariff-based competitive bidding route,” the brokerage firm said.