Maharatna CPSE Power Grid turning ex-dividend soon: Buy post Q3 results?

Dividend details of Power Grid Corporation

Power Grid Corporation has said in a stock exchange filing that its Board of Directors “have approved the payment of 2nd Interim Dividend of Rs. 5/- per equity share of Rs. 10/- each (@50% of the paid-up equity share capital) for the Financial Year 2022-23. The 2nd Interim Dividend shall be paid to the Members on 24th February, 2023.”

Due to India’s T+1 settlement mechanism, the stock is going ex-dividend on Wednesday. The company has fixed Wednesday, February 8th, 2023 as the “Record Date” for determining the eligibility of the shareholders for payment of interim dividend.

Q3 earnings of Power Grid Corporation

On a consolidated basis, the company recorded a net income of ₹11,530 Cr in Q3FY23 compared to ₹10,724 Cr recorded in Q3FY22, representing a YoY growth of 8%. The company posted a net profit of ₹3,645 Cr in the quarter ended December 2022 compared to ₹3,293 Cr posted in the year-ago quarter, representing a YoY growth of 11%. The company’s profit before tax (PBT) reached ₹3,743.47 Cr in Q3FY23 compared to ₹4,246.79 Cr in Q3FY22, representing a fall of 11.85% YoY.

Total expenses grew 20.54% year-on-year to ₹7,786.91 crore in Q3 FY23 as compared to ₹6,460.20 Cr in the year-ago quarter, whereas the company’s revenue from transmission stood at ₹11,055.39 crore, up 7.6% YoY from ₹10,274.91 Cr in Q3FY22. Power Grid reported that its consultancy revenue was ₹173.63 crore in the quarter ended December 2022, up 0.20% YoY from ₹173.28 Cr in the quarter ended December 2021, while its telecom revenue was ₹209.60 crore in the third quarter of FY23, up 13.21% YoY from ₹185.15 Cr reported in the third quarter of FY22. Power Grid Corporation holds a CAPEX plan of ₹8,800 crore for FY23.

Should you buy the shares of Power Grid Corporation?

Post the Q3 earnings of Power Grid, the research analysts of the broking firm Sharekhan said “Power Grid has a robust project pipeline worth Rs. 47,600 crore and has capitalised ~Rs. 20,695 crore in FY22, which provides earnings visibility for 2-3 years. We thus expect a 10% CAGR in PAT over FY2022-FY2025E along with RoE of ~18-19% in FY25E. We maintain a Buy on Power Grid with an unchanged PT of Rs. 265, as valuation of 1.6x/1.4x FY24E/ FY25E P/BV seems attractive considering decent growth outlook, healthy RoE and a dividend yield of ~6-7%.”

The research analysts of the broking firm Emkay Global said “We maintain BUY on the stock, with Dec-24 TP of Rs250/share. Over the past 5 years, the average P/B for the stock has been ~1.7x, with RoE of 17-18%. At CMP of Rs213/share, the stock trades at ~1.7x. The stock provides dividend yield of ~7% presently. Risks include delay in commissioning of under-construction projects and deferral in bidding of new projects.”

The research analysts of the broking firm BOB Capital Markets said “PWGR’s Q3 results were in line with our estimates. However, given an expected decline in JV earnings due to higher interest cost, we cut our FY23 EPS estimate by 12% while marginally adjusting FY24/FY25 forecasts. We remain cautious on scale-up of PWGR’s transmission network given the decreasing opportunities and intense bidding competition, but upgrade our rating on the company from HOLD to BUY as the risk-reward has turned favourable post the 5% stock correction over the past one week. Our DCF-based TP remains unchanged at ₹251 (implied FY25E P/B of 1.7x).”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.