CLSA has recommended a sell rating on Power Grid Corporation with a target of Rs 90 in the report dated October 20, 2007.
"In Power Grid, 85% owned by the Government of India, is the largest player in power transmission in India, carrying 45% of the total power generated. While it is a monopoly business, it does not have the pricing power given its regulated returns. The company earns a fixed 14% return on equity.
We believe Power Grid does not have much potential upsides like NTPC, which can benefit from coal mining, fly ash sale and merchant power plants. Compared to NTPC, Power Grid makes lower returns and potential upsides are limited. Trading at 31x FY09 EPS, 3.7x P/B Power Grid is the most expensive utility in the region. The sharp rise in share price since listing could be to some extent attributed to lofty expectations for valuations of Reliance Power’s proposed IPO. Given steep valuations, low probability of upside to earnings, we initiate coverage with sell." according to CLSA research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decision.
"In Power Grid, 85% owned by the Government of India, is the largest player in power transmission in India, carrying 45% of the total power generated. While it is a monopoly business, it does not have the pricing power given its regulated returns. The company earns a fixed 14% return on equity.
We believe Power Grid does not have much potential upsides like NTPC, which can benefit from coal mining, fly ash sale and merchant power plants. Compared to NTPC, Power Grid makes lower returns and potential upsides are limited. Trading at 31x FY09 EPS, 3.7x P/B Power Grid is the most expensive utility in the region. The sharp rise in share price since listing could be to some extent attributed to lofty expectations for valuations of Reliance Power’s proposed IPO. Given steep valuations, low probability of upside to earnings, we initiate coverage with sell." according to CLSA research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decision.
