ICICI Securities has reiterated its BUY recommendation on Power Grid Corporation of India (PWGR), with a revised target price of Rs 361. This revision comes after the company's continued dominance in winning large-scale transmission projects and an upward revision in capital expenditure (capex) guidance, despite muted quarterly results due to regulatory impacts. Power Grid Corporation continues to maintain its leadership in India's transmission sector, winning over Rs 760 billion worth of projects in the first nine months of FY25. Despite facing a decline in quarterly revenues and earnings due to tariff-related adjustments, the company remains optimistic about growth, driven by a strong order book and increased capex plans. ICICI Securities values Power Grid at 18x FY27 earnings and projects improved margins and project execution in the medium term.

Strong Project Wins and Expansion

Power Grid Corporation has demonstrated resilience with significant project acquisitions. In Q3FY25, the company secured seven inter-state transmission system (ISTS) projects valued at over Rs 190 billion, contributing to an order book worth Rs 1.5 trillion.

Over Rs 760 billion worth of new projects were won in 9MFY25.
This robust project pipeline is expected to drive strong execution over the next four years.
The company has maintained over 50% market share in transmission project bidding, reinforcing its position as the preferred partner for critical infrastructure initiatives, such as high-voltage direct current (HVDC) projects.

Capex Guidance Increased for FY25

Power Grid has revised its capex guidance for FY25 to Rs 230 billion, an increase from the previous Rs 200 billion. The company is also positioning itself for future growth with plans to ramp up capital expenditures to Rs 350 billion by FY27.

Capex incurred in 9MFY25 stands at Rs 177 billion.
The company expects to capitalize projects worth an additional Rs 100 billion in Q4FY25.
Future bidding opportunities over the next 5–6 years are estimated at Rs 3 trillion.
These investments align with India’s renewable energy expansion goals, necessitating enhanced transmission infrastructure.

Muted Q3FY25 Financial Performance

The company faced short-term challenges in its quarterly financials. Standalone revenue declined by 4% year-over-year (YoY) to Rs 101 billion, while EBITDA contracted by 8% to Rs 85 billion. The earnings were impacted by changes in the Central Electricity Regulatory Commission (CERC) tariff regulations, which affected operational margins.

Net profit fell 2% YoY to Rs 39 billion.
EBITDA margins dropped to 84.2%, compared to 87.9% in the same period last year.
Despite these setbacks, management remains confident in achieving improved performance in the coming quarters through better execution and operational efficiencies.

Technical Analysis: Price Levels and Trends

Power Grid's stock has faced recent corrections but continues to show potential for recovery based on key technical indicators.

Price Action:

Current price: Rs 285
52-week high: Rs 366
52-week low: Rs 258
Candlestick Analysis:

The daily charts indicate a potential reversal pattern after recent declines, with the stock forming a doji candle near key support levels.
Momentum indicators such as the Relative Strength Index (RSI) remain neutral but suggest accumulation.
Fibonacci Levels:
Based on recent price movements, here are the detailed retracement levels:

Support and Resistance Levels:

Immediate support: Rs 275
Key resistance: Rs 300, with a breakout above this level signaling renewed bullish momentum.

Disclaimer: Investors are advised to conduct their due diligence and consult with financial advisors before making any investment decisions. Market conditions can change, and past performance is not indicative of future results.