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On Wednesday, JPMorgan commenced coverage on Power Grid Corp of India Ltd (PWGR:IN), assigning an Overweight rating and setting a price target of INR 316.00. The initiation reflects a positive outlook on the company’s role in India’s growing transmission capital expenditure (capex), which is anticipated to be fueled by rising power demand and the integration of renewable energy sources.
Power Grid Corp, with its dominant position in the Indian power transmission sector, is seen as a primary beneficiary of the country’s infrastructure expansion. India’s transmission capacity is expected to double by the fiscal year 2032 compared to fiscal year 2022, with projected transmission capex surpassing INR 9 trillion. Power Grid Corp’s substantial market share, which includes approximately 85% of inter-state transmission capacity and over 50% in Tariff Based Competitive Bidding (TBCB) projects, positions the company favorably within this growth narrative.
The company’s strong balance sheet and business model, along with high Returns on Equity (RoE) ranging between 16% and 18%, provide a solid foundation for investment. Additionally, Power Grid Corp’s significant scale and operational advantages contribute to its attractiveness as an investment opportunity.
Despite a ~23% decline from its peak in September 2024, compared to an 11% fall in the NIFTY50 index, Power Grid Corp’s stock is currently trading at an appealing valuation. The price-to-book value (P/BV) stands at 2.5 times, and the price-to-earnings (P/E) ratio is 15 times based on FY27E estimates. The firm also boasts an average RoE of 17.5% and a forecasted compound annual growth rate (CAGR) for earnings per share (EPS) and book value per share (BPS) of 7% from FY24 to FY28E.
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