POWERGRID

A Tactical Opportunity Amidst Short-Term Headwinds

has experienced a recent stock correction, driven by a muted financial performance in Q1 FY26 and softness in power demand due to an extended monsoon. However, the company's long-term fundamentals remain robust, making the correction an attractive entry point for investors. → Q1 FY26 Performance: The company reported modest revenue growth of 2% year-on-year (Y-o-Y), while transmission revenues were flat due to a lack of new additions. EBITDA and net profit saw a slight decline of 5% and 2.5% respectively, attributed to non-recurring items like higher CSR expenses and smart meter project costs. Project commissioning was low at ₹1,800 crore, but this is viewed as a timing issue, as capex spending was healthy at ₹7,000 crore. → Strong Long-Term Outlook: PGCIL's work-in-hand has expanded significantly to ₹1.49 lakh crore as of July 2025, providing strong earnings visibility. The company has a substantial project pipeline to facilitate renewable energy (RE) integration, a key growth driver. Bidding activity, though subdued in Q1, is expected to accelerate, with projects worth ₹40,000 crore currently under bidding and an additional ₹1 lakh crore already approved. → Capex and Valuation: The company has guided a capex of ₹28,000 crore for FY26 and ₹35,000 crore for FY27. It aims to commission projects worth ₹22,000 crore in FY26. The stock is currently trading at an attractive valuation of 15 times FY27 estimated earnings and 2.5 times book value. The combination of a strong project pipeline, policy support, and an expanding capex program positions PGCIL for a solid return with limited downside risk.