Buy This Heavy Electrical Equipment Stock, Hit 52-Week Low, For A Potential Gain of 18%, PAT Up 125%

Leading brokerage firm has given a buy call to the stock of Schneider Electric Infrastructure Ltd. for a potential gain of 18%. If you buy the stock at its current price of Rs 103 apiece, you can get a target price of Rs 122 apiece. The Revenue has jumped to Rs. 340cr in Q4FY22 (+37.6% YoY) driven by strong growth momentum in order. Adj. PAT grew by a significant 125.3% YoY to Rs. 2.7cr. EBITDA margin came in at 5% (+700bps YoY), aided by managements actions to mitigate raw material inflation impact.

1. Stock Outlook

The current market price of the stock is Rs 103 apiece. The 52-week high and 52-week low of the stock was Rs 154 apiece and 98.75 apiece. The stock generated a negative return of 18% in 1 year. Brokerage firm Geojit believes that the company will continue its growth momentum.

Current Market Price	Rs 103
Target Price	Rs 122
Potential Gain	18%
52-week high	Rs 154
52-week low	98
1 year return	-18%

2. Topline led by strong growth momentum in order

Revenue grew 37.6% YoY to Rs. 340cr in Q4FY22 aided by strong growth momentum in order. Orders grew 46% YoY to INR5,040 million in Q4FY22. EBITDA rose by 448.6% YoY to Rs. 17cr in Q4FY22. Company has been able to solve issues with customers due to sight readiness or the liquidity issues and that have helped in maximizing the revenue. Gross margin for the quarter was about 29.2%, decreased by (-6.4%) points versus last year.

EBITDA margin came in at 5% (+700bps YoY), as company has been able to partly pass on raw material inflation impact to customers, also actions on the overall structural costs helped to mitigate impact. Adj. PAT grew by 125.3% YoY to Rs. 2.7cr.

3. Roadmap ahead

The economy currently is inflationary, which has been a result of solid demand coming back post COVID also due to the Ukraine war, commodities are at all-time high and there are severe shortages in the market. Company probably will see a little bit of turbulence going ahead.

Considering the various announcements by the Government of India on modernizing the grade, improving the digitization in the utilities, there is a solid runway for growth as far as both generation and distribution of electricity is concerned.

4. Valuation

With robust growth in topline and strong growth momentum in order across all the segments, we expect the business to continue its growth. Raw material inflation may remain a concern, however company has been able mitigate the impact by price hikes and cost optimization actions.

We expect earnings to grow at healthy 34% CAGR over FY22-24E. We assign a BUY rating with a target price of Rs.122 based on 34.5x FY24E EV/EBITDA.

5. About Schneider Electric Infrastructure Ltd

Schneider Electric Infrastructure Limited (SEIL) was incorporated in the year 2011. SEIL is engaged in the business of manufacturing, designing, building and servicing technologically advanced products and systems for electricity network. The current market capitalization is Rs 2466 crore.

Disclaimer

The stock has been picked from the brokerage report of Geojit Financial Services Limited. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.