Reiterate 'buy' on Power Grid - TP Rs.135 - Geojit BNP Paribas Financial Services

- Buy rating on Power Grid is reiterated with an increased target price of Rs. 135 over one year. TP earlier was Rs.122.

- Sales and EBITDA estimates for FY13 and FY14 have been increased on the assumption of faster execution of power transmission projects.

- However, PAT estimates remain unchanged due to reduction of other income estimates as the capex assumptions are increased and. Lower PAT may be also due to higher tax rate assumptions.

- Capitalisation for 2013 is expected at 9% and it would be 10.5% in 2014 as company's execution has been better than market expectations for the last two quarters.

- Strong execution is likely to continue, driving sales and EBITDA growth of 18% and 18.7% respectively over FY13-17.

- Target price is hiked to Rs.135 over one year. Higher capex and execution delays leading to equity dilution is key risk to the target price.

- Company has plans to spend Rs.1000 billion during FY13-17 indicating a run -rate of Rs.200 billion per annum.

- At the current execution rate, the company is expected to raise fresh equity of Rs.25 billion in 2015 in order to continue funding its capex plans. Alternatively, the company can increase its D/E ratio.

Source : Equity Bulls

Keywords