Power Grid rating: Buy — Rebate impacted profitability in Q1

Power Grid’s (PWGR’s) results highlight the impact of rebate (Rs 10.75 bn), with reported S/A PAT declining 18.5% y-o-y to Rs 28.1 bn. Adjusted for the same and prior-period revenue, PAT was up 21% y-o-y. Rs 234-bn worth of awards would be bid out under various schemes, but we expect some delays. In this context, a declining order book does present the risk of growth slowdown. However, valuations at 1.3x FY22e P/BV and ~9% FY22e dividend yield remain attractive for a company with steady RoEs of ~17%. Maintain Buy, with DCF-based TP of Rs 221/sh.