Power Grid Corporation shares jump 4% on approval of ₹656 crore investments for transmission projects

Power Grid Corporation, a Maharatna Central Public Sector Undertaking (CPSU) and the largest electric power transmission company saw its shares zoom 4% to ₹287.45 apiece in today's intraday session after the company board on Monday approved investments worth ₹656 crore for the implementation of electricity transmission projects in the country.

According to the company filing, the Board of Directors approved the implementation of Unified Load Dispatch and Communication (ULDC) Phase-III (SCADA/EMS Upgradation Project –Northern Region SLDCs) at an estimated cost of ₹514.66 crore with a commissioning schedule of November 15, 2025.

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The Committee of Directors on Investment on Projects approved the augmentation of a 765/400 kV, 1500 MVA transformer (4th) at Bhiwani at an estimated cost of ₹141.09 crore, scheduled to be commissioned by May 5, 2025.

Power stocks have rallied in the past three months, with the BSE Power index up 50% and both public and private sector utilities showing strong gains.

In a recent report, global brokerage firm Jefferies said power stocks are set to benefit from rising power demand in the country on the back of an increase in temperature in the summer months. 

The brokerage has a 'buy' call on the stock with a target price of ₹270 apiece, but at current levels, the stock is trading above the brokerage's target price. Power Grid Corporation shares soared nearly 60% in the last six months and 78% in a year. 

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BoB Capital Markets increased the stock's target price to ₹320 per share, up from the previous target of ₹250. The rationale behind this adjustment is that the new target price, although raised, remains conservative in comparison to its private sector counterparts. 

The brokerage asserts that the company justifies this valuation multiple due to its superior return on equity (ROE) ranging from 15% to 19%, accompanied by a healthy dividend yield and a low-risk profile.

In terms of financials, the company posted a 10.50% YoY jump in its consolidated net profit at ₹4,028 crore, while it reported ₹11,500 crore in consolidated revenue from operations, an increase of 2.55% YoY.  

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On the capex front, the management has planned a capex of ₹150 billion, vs. ₹125 billion guided earlier, and a capitalisation of ₹170 billion for FY25. Works in hand total ₹777 billion, of which TBCB projects stand at ₹414 billion and the remainder are under RTM. 

For FY26, PWGR has guided for an even stronger capex of ₹200 billion. Further, management indicated scope for further upward revision as further clarity on projects emerges over the next six months. In the long term, the company has a ₹2.1 trillion capex pipeline for the next decade, as BoB highlighted in its report.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.