Buy Power Grid Corporation Ltd - Motilal Oswal

Power Grid Corporation (PWGR IN; Mkt Cap USD9.7b, CMP Rs96, Buy)

For 3QFY11, Powergrid (PGCIL) reported revenue of Rs20.5b (up 35% YoY), EBITDA of Rs17.3b (up 39% YoY) and net profit of Rs5.9b (up 21% YoY).

Fixed asset capitalization for 3QFY11 was Rs17.3b v/s Rs51b in 1HFY11, much higher than the historical annual average of Rs33b during FY09-10.

PGCIL has signed/firmed up projects for commissioning in 12th plan totalling to Rs1,200b (2x+ of Rs550b capex target for 11th plan).

Ahead of the deadline for competitive bidding regime; it has full visibility on 12th plan projects/capex.

Valuation and view: We expect PGCIL to report net profit of Rs26.4b in FY11 (up 16%), Rs32.4b in FY12 (up 23%), and Rs37.3b in FY13 (up 15%). The stock trades at 13.6x FY12E and 11.9x FY13E EPS, and at 1.8x FY12E and 1.7x FY13E BV. Our target price of Rs123 is the average of our DCF and SOTP valuation. Maintain Buy.

Source : Equity Bulls

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