Power Grid shares hit all-time high; check brokerages' views and target prices

Power Grid share price: Shares of Power Grid Corporation of India surged as much as 2.92 per cent to hit an all-time high of Rs 205.90 apiece on the BSE on Wednesday, September 20, after the company, in its regulatory filing, informed that a meeting of the "Committee of Directors for Bonds" is scheduled to be held on September 25, 2023, to consider the issue of unsecured, redeemable, non-convertible, non-cumulative, taxable bonds as "POWERGRID Bond - LXXIV (74th) Issue" (Debenture) under private placement.

The stock eventually ended at Rs 204.70, up 2.32 per cent on the BSE.

What brokerages suggest

Geojit Financial Services, in its September 4, 2023 report, said that the company’s growth momentum is expected to continue, backed by steady growth in the pipeline and margin improvements on reduced costs.

Upcoming renewable energy projects, along with a risk-averse business model, should enhance its growth prospects. However, input cost volatility continues to remain a threat to profitability in the short term. Moreover, valuation appears relatively high at the current price levels.

"Hence, we remain cautious and maintain our rating at HOLD on the stock, with a rolled forward target price of Rs 268, based on 1.9x FY25E Book value per share (BVPS)," it added. 

Sharekhan, on the other hand, has maintained a 'buy' call on the stock with a target price of Rs 290. 

In its rationale, the brokerage said, "Power Grid has a robust project pipeline worth Rs 48,700 crore, and management has guided for a pick-up in transmission capex going forward, which provides earnings visibility for the next couple of years. Thus, we expect a 10 per cent compound annual growth rate (CAGR) in profit after tax over FY2023–FY2025E and see an upside risk in the case of a pick-up in capex."

"Hence, we maintain a buy rating on Power Grid with an unchanged PT of Rs. 290. Valuation of 1.7x its FY2025E P/BV seems attractive, considering a decent growth outlook, a healthy RoE of 19 per cent, and a dividend yield of nearly 6 per cent," the brokerage said in its September 7 report.