Power Grid capex acceleration and TBCB order pipeline support earnings visibility

Investment View and Valuation

In its August 8, 2026 Q1 FY27 result update, PL Research retained its BUY rating on Power Grid Corporation of India (PWGR). The broker views healthy capex execution, accelerating capitalisation, improving order inflows and a substantial transmission bidding pipeline as key supports for future earnings.

PL Research reduced its target price to Rs 331 from Rs 346, valuing the stock at 2.7 times estimated FY28 book value. The report also highlights an attractive dividend yield of about 4 per cent.

Q1 FY27 Financial Performance

Power Grid’s consolidated Q1 FY27 results were below PL Research and Street expectations. Revenue increased 3 per cent year-on-year to Rs 11,497 crore, but was 5 per cent below PL Research estimates and 8 per cent below Street estimates. EBITDA rose 4 per cent year-on-year to Rs 9,537 crore, missing PL Research and Street estimates by 3 per cent and 9 per cent, respectively. EBITDA margin improved by 120 basis points year-on-year to 82.9 per cent, aided by lower other expenses.

The apparent lack of PAT growth reflected a Rs 230 crore one-off gain in Q1 FY26. Adjusted for this gain, Q1 FY27 PAT growth was about 6 per cent year-on-year, according to management.

Regulatory Impact and Execution Trends

PL Research characterises the quarter’s weakness as regulatory rather than operational. A roughly Rs 560 crore drag, comprising about Rs 330 crore of depreciation on assets crossing the approximately 12-year tariff curve and Rs 230 crore of lower interim CERC interest, offset around Rs 790 crore of revenue from newly commissioned assets.

Operational indicators remained sound, with system availability at 99.80 per cent and receivable days improving to 12.1 from 19.4. Q1 FY27 capex was Rs 7,770 crore, up 11 per cent year-on-year, while capitalisation rose about 3.1 times year-on-year to Rs 5,280 crore.

Q1 capex and capitalisation represented 21 per cent and 18 per cent, respectively, of management’s FY27 guidance of Rs 37,000 crore capex and Rs 30,000 crore capitalisation. Management indicated possible upside to FY27 capitalisation guidance, although PL Research expects clarity only after Q3 FY27 results.

Order Momentum and Transmission Pipeline

Order momentum improved materially. New Q1 FY27 order inflows were Rs 10,500 crore, compared with nil in FY26 after the Leh HVDC project was removed in Q4 FY26.

Works in hand stood at about Rs 1.75 lakh crore, comprising 83 per cent TBCB and 14 per cent RTM. This provides capitalisation visibility of more than four years. The bidding pipeline exceeded Rs 1.19 lakh crore, including Rs 73,900 crore under bidding, of which about 80 per cent was ISTS, and Rs 45,600 crore yet to be floated.

Management reiterated a long-term opportunity exceeding Rs 15 lakh crore, supported by the CEA 900+ GW plan, Brahmaputra hydro projects, data-centre demand and green-hydrogen demand.

TBCB Position and Emerging Opportunities

Power Grid won 6 of 19 projects bid in FY27-to-date, representing more than Rs 2,200 crore of annual tariff, and held about 47 per cent cumulative ISTS tariff share. The company also secured India’s first TBCB synchronous condenser scheme, Fatehgarh-II.

Operational TBCB equity doubled year-on-year to Rs 9,970 crore, with another Rs 3,410 crore under construction. These assets are entirely equity funded without parent debt.

A CERC amendment enabling transmission developers to own storage creates a potential regulated battery energy storage system (BESS) opportunity. Power Grid has filed petitions in relation to this opportunity.

Earnings Outlook and Key Factors

PL Research cut its FY27E and FY28E EPS estimates by 0.6 per cent and 1.1 per cent, respectively, to factor in lower return on equity from TBCB projects.

Factors relevant to the thesis include regulatory income and tariff-related impacts, execution of capex and capitalisation plans, TBCB return on equity, and conversion of the transmission bidding pipeline into orders.