Shares of Power Grid Corporation of India slipped in the afternoon deal on Wednesday after the company came out with a muted second quarter performance of the current fiscal.

The stock, which opened firm at Rs 192 and moved further to Rs 194.35, is currently trading weak at 189.75, down 1.04 per cent, on the NSE as at 2.45 pm.

Analysts have mixed take on Power Grid stock.

While Emkay Global upgraded the stock to 'buy' from 'hold', ICICI Direct retains its 'hold' rating even as Motilal Oswal Securities maintained its 'buy' stance.

Q2 revenues

Power Grid reported weak Q2FY20 results wherein core transmission segment revenues posted low single digit revenue growth. Reported revenues came in at Rs 8,685 crore as against its estimate of Rs 9,102.70 crore, said ICICI Direct Research in a report. Transmission revenues grew 4 per cent y-o-y at Rs 8,497.60 crore, lower than its estimates of Rs 8,805.90 crore.

"On the other hand, telecom & consultancy revenues were above our estimates at Rs 198.7 crore and Rs 173.6 crore (estimate of Rs 165.1 crore and Rs 131.6 crore), respectively, ICICI Direct, which reiterates its Hold recommendation with a 12-month price target of Rs 210.

Investment in renewable energy and growth in power demand should drive the need for transmission works, said Motilal Oswal Securities and added Rs 48,000 crore of projects are envisaged to be awarded for renewable integration.

PWGR’s recent award wins (won 7 out of 13 projects in YTD FY20) highlight its competitive positioning to win such projects as they arrive. "We note that capitalisation run-rate for FY20 may still be at risk if the Raigarh-Pugalur project gets deferred. Further, the nature and clarity of the company’s asset monetisation program needs to be watched," Motilal Oswal Institutional Equities said in a note while expecting a price target of Rs 244.

For Emkay Global, the company's Q2-FY20 revenues grew in line with its estimate), driven by strong performance across all segments and PAT is 'broadly in line with its estimate'.

PGCIL plans to set up an Infrastructure Investment Trust (InvIT) by March 20 in order to raise Rs 10,000 crore by unlocking value in some of its transmission assets. The proceeds would help the company fund its debt requirements in future projects.

"We have pruned our earnings estimate marginally for FY20/FY21 by 1.1 per cent/1.3 per cent to factor in the shift in capitalisation. In addition, we now value PGCIL on FY22 SoTP valuation with a revised target price of Rs 229, said Emkay.

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