Buy Power Grid Corporation - PINC Q2 Result Review

Power Grid's (PGCIL) Q2FY11 results were below expectations with adjusted PAT at Rs6.5bn - due to high deferred tax. However, revenues and EBIDTA were in line with our estimates at Rs21bn and Rs17bn respectively. We increase our FY12 estimates to build in higher capex. We roll forward to FY12, thus upgrading our target price to Rs115.

- Healthy 42% growth in PAT
- Plans to double capex in 12th Five Year Plan to Rs1trn
- Earnings expected to grow at 30% CAGR over FY10-12

VALUATIONS AND RECOMMENDATION

With PGCIL moving ahead to meet its 11th plan capex target, we believe it is better placed as compared to its peers in the generation space. We upgrade our FY12 estimates to build in higher capex. We roll forward to FY12 and value the company at 2.2x FY12 book to arrive at our upgraded target price of Rs115. Upgrade to BUY.

Source : Equity Bulls

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