Power Grid shares: Here are Maharatna PSU's stock price targets post flattish Q2 profit

Analysts are mixed on prospects of Power Grid Corporation of India Ltd (PGCIL) stock following a flattish Q2 profit. PGCIL posted flat profit despite an estimated 4 per cent YoY rise in regulated equity, thanks to tighter CERC norms for O&M cost recovery. While MOFSL sees a 36 per cent potential upside for the Maharatna PSU stock, Nuvama believes the stock is at peak valuation and bakes in all positives.

"We find PGCIL expensive at 3.1 times FY27 P/BV with a dividend yield of only 3 per cent. Key variables to watch out for over the next 12–18 months: PGCIL’s capex, capitalisation, and share in TBCB (we factor in 70 per cent); and RoE in new TBCB wins," Nuavama said.

The brokerage said despite factoring in capex guidance, it find EPS CAGR of only 7 per cent over FY24–27E given back-ended comm/large base. Chunky HVDC projects add to EPS only by FY30, it said.

"We find PGCIL expensive at 3.1 times FY27E P/BV; retain ‘Reduce’ with a target price of Rs 244 from Rs 236 earlier," Nuvama said. On Monday, Power Grid shares were up 0.88 per cent at Rs 319.20 on BSE.

In the analyst meet, FY25 capex guidance was increased marginally to Rs 20,000 crore (Rs 18,000 crore previously), capex and capitalisation guidance for FY26 was Rs 25,000-30,000 crore while capitalisation for
FY27 was guided at Rs 40,000 crore.

Power Grid highlighted that assuming a 50 per cent win rate, it could secure Rs 1.92 lakh crore in upcoming project bids under NEP 2032, in addition to its current Rs 1.43 lakh crore order book, implying a minimum cumulative capex of Rs 3 lakh crore by 2032. Of the current order book, 32 per cent is from RTM projects, where the company earns a healthy 15 per cent ROE.

"We derive the target price of Rs 426 for Power Grid based on Dec’26E Ebitda and an EV/Ebitda multiple of 11 times, which we think is reasonable, though at the higher end of the historical range," MOFSL said.

Manish Chowdhury, Head of Research at StoxBox said although Power Grid Corporation of India experienced a slight rise in expenses relative to previous quarters, this had minimal impact on its margins and profitability.

"Looking ahead, the government's focus on infrastructure development, along with increased power demand driven by economic activities, is expected to fuel growth in India's utility sector. Power Grid's upcoming renewable energy initiatives, backed by substantial capital expenditure and a resilient business model, signal a promising growth outlook over the long term," he said.