Power Grid Corporation of India - Attractivey Priced - FPO Note - PINC Research

Priced Attractively!

Power Grid Corporation's (PGCIL) FPO price band of Rs85-90/share is priced attractively. At the upper price band, the stock is available at 1.7x FY12E book of Rs51.5. The company will raise ~Rs37bn from the issue, sufficient to fund its ongoing capex. It plans to more than double its capex target for the XIIth plan to Rs1.2trn. Recommend Subscribe.

* More than double its XIIth Plan capex target to Rs1.2trn
* Higher capitalization should aid 22% PAT CAGR over FY11-13
* Telecom business can provide upside

VALUATIONS AND RECOMMENDATION

Following the FPO, we believe PGCIL would emerge stronger to meet its XIth Plan capex target. At the upper price band of Rs90/share, the stock is offered at 1.9x and 1.7x FY11E and FY12E book of Rs46.7 and Rs51.5/share respectively. We believe the company is placed better than peers in the generation space. Improving STOA charges, incentives, consultancy and telecom income should aid RoE expansion. We recommend Subscribe with a target price of Rs115.

Source : Equity Bulls

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