PSU Stock alert, global brokerage recommends buying option for Power PSUs

Global brokerage firm Macquarie has begun coverage on power financing public sector units (PSUs)—specifically PFC, REC, Power Grid, and NTPC. Due to their unique roles within the ecosystem, these companies are highlighted as clear beneficiaries of the sector’s growth cycle.

Macquarie has assigned Power Grid Corporation of India Ltd. a 'Buy' rating and a price target of Rs 380 per share, indicating a potential upside of 18% from Tuesday's closing. According to Macquarie, Power Grid is poised to gain from a significant increase in transmission capital expenditure (CAPEX).

The sizeable rebound in the total addressable market (TAM) alleviates concerns about competitive pressure affecting returns on new capital investments in the transmission business.

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Power Grid's capex is expected to rise to Rs 25,000 crore, Rs 30,000 crore, and Rs 35,000 crore in FY26E, FY27E, and FY28E, respectively, compared to an annual average of Rs 10,500 crore over FY21-24. Over FY25-32E, PGCIL's capex opportunity is expected to exceed Rs 3 lakh crore, with potential upside, versus approximately Rs 1.3 lakh crore over FY17-24.

The firm initiated coverage on NTPC with a 'Buy' rating and a price target of Rs 475 per share, indicating a potential 25% upside from current levels. The brokerage highlights that NTPC offers an attractive mix of regulated capex and renewable energy exposure.

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As of PFC, with an 'Outperform' rating and a price target of Rs 630, indicating a 35% potential upside from the stock's closing levels on Tuesday. The foreign brokerage mentioned that renewable capacity expansion has been a key driver of credit growth in the power sector.

Macquarie expects PFC to re-rate as asset resolutions improve, slippages decrease, and the renewable energy mix grows. On REC, Macquarie initiated with an 'Outperform' rating and a target price of Rs 660, suggesting a 28% upside.

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