Multinational brokerge HSBC has raised the share price target for Power Grid Corp. to account for increased pace of commissioning and new opportunities from intra-state transmission projects and BESS. Analysts revised their 12-month price target to Rs 290 from Rs 260 earlier and upgraded rating to 'hold' from 'sell'. The new target indicates a nearly 3% downside to the previous close.
The government's policy changes for faster commissioning of critical transmission lines in the country will increase the pace the PSU company's earnings growth, according to a note.
Moreover, analysts said since Power Grid was not able to participate in intra-state transmission systems, which the states themselves controlled, they saw growth opportunities as limited. The smaller size of projects related to battery energy storage systems (BESS) meant PWGR was reluctant to participate.
"We believe with increased renewables penetration and recent curtailment issues, reliance on BESS is set to increase. PWGR has started participating in BESS projects, and project sizes are set to increase. As well, BESS will have a role in ancillary services too, which would allow for integration with PWGR's existing lines," the HSBC note said.
The government has also allowed a fast-track mechanism for electronic capital goods and capital goods are put which encourages joint ventures by Chinese transformer equipment companies and improve component availability.
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