Hi all, I’ve just done an updated valuation on Powergrid, and it seems to be a compelling long term investment at current prices.
Powergrid (NSE: POWERGRID) owns and operates 45% of India’s electricity transmission network. It meets all the criteria for a good long term investment:
- Moat : the dominant player in transmission. Has 20~30 year contracts with assured ROEs. Is the government’s preferred vendor for large scale or complex transmission projects
- Long growth runway : increasing Indian power consumption and massive investments in new renewable power generation capacity
- Management execution : consistently exceeded regulatory benchmarks with 99%+ transmission system availability and demonstrated ability to execute large scale projects over the last decade
- Attractive valuation : limited downside possibility at current prices, with attractive returns on the upside. Risks to the growth trajectory: regulatory regime and tariff changes, competition by private players and fraud / corruption.
Please let me know your thoughts / feedback
Valuation model (base case): 20230917_PowerGrid_analysis_ to share – Google Sheets
To get a sense of each project’s unit economics, I also looked at the ROEs on their InvIT projects based on FCF and equity value:
disc – invested, this is not a buy / sell recommendation
| Subscribe To Our Free Newsletter |
