Monday, August 15, 2011

Power Grid - Buy on dips

Power Grid, too, is offering a good risk-reward equation. At current levels, the stock is offering almost two per cent dividend yield and is trading at reasonable valuations, given its earnings growth of 23-25 per cent over the next two years. Also, despite downgrades in the power sector, analysts don’t expect PGCIL’s earnings estimate to get lowered, given its relatively less risky business model. Growth visibility is also good on the back of the ongoing capex and its future plans. In the medium term, the company’s RoE is expected to go up, consequent to completion of ongoing projects, which should possibly lead to re-rating of the stock. In the long run, it aims to invest Rs 1,20,000 crore in the 12th five-year plan (2012-2017), which should help sustain growth.

Our Recommendation :

The scrip has not lost much in the recent carnage and is able to hold fort firmly.

Time Span Price Change %Change
Today 103.65 0.60 0.58
Week 102.70 0.35 0.34
Month 109.85 -6.80 -6.19
Three Months 101.45 1.60 1.57
Six Months 96.25 6.80 7.06
One Year 99.60 3.45 3.46

Investors with long term horizon should acquire the scrip on declines and hold for a period 18-24 months for a decent upside. There appears to be dim down side risk !

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Ravina Consulting
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