Power Grid rating – Buy: Strong show by transmission segment

Power Grid (PWGR)’s result highlights strong underlying numbers for its Transmission segment—implying ~18% y-o-y growth. Reported S/A PAT was further aided by higher other income, resulting in a 24% y-o-y rise. PWGR has won Rs 90-100 bn of awards in Q3, which is a positive, given a declining order book. Valuations at 1.5x FY22e P/BV and ~7% FY22e dividend yield remain attractive for a company with steady RoEs of ~17%. Maintain Buy, with DCF-based TP of Rs 248/sh.

Profit boosted by higher other income
PWGR’s adj. S/A PAT was up 25.4% y/y to Rs 33 bn (16% ahead of our est.) on account of higher other income. Even adjusted for the same, underlying transmission numbers are strong and imply ~18% y-o-y growth, in our view. Other income was up 25.7% y-o-y to Rs 6.4 bn. This was led by higher late payment surcharge income and higher dividends from subsidiaries.