This Small Cap Power Sector Stock Grew 268.09% In 3 years, Shares Can Jump 26%, Buy

ICICI Securities has placed a 'buy' call on Genus Power Infrastructures Limited (GPIL). According to the brokerage's recent report on GPIL, it sees a potential upside of 26% from the current level in 12 months with a target price of Rs 107 per share. GPIL is a small-cap power sector company with a Rs 2,226.34 market cap.

Genus Power Infrastructures' performance improved in Q2FY23 due to better order execution. Revenue for the quarter was at Rs2.2bn (up 17% QoQ, 23% YoY) and EBITDA Rs169mn (up 17.8% QoQ, 16.1% YoY). However, EBITDA margin was flat QoQ at 7.7%. PAT at Rs102mn was up 56% YoY and improved substantially QoQ (vs Rs7mn in Q1FY23).

The brokerage said, "We believe the tide may turn over the next few months in terms of both order execution and margins, mainly due to: 1) reduction in commodity costs, 2) supply-chain normalcy improving semiconductor availability thereby aiding higher capacity utilisation and operating leverage, 3) execution on better-margin orders, and 4) substantial increase in order-awarding."

Stock Outlook & Returns

The GPIL stock is currently trading at Rs 86.10 per share, 1.53% above the previous close. Today, it opened at Rs 85.80 per share on NSE. It recorded its 52-week high on 21 April 2022 at Rs 112.50 and its 52-week low on 07 March 2022 at Rs 58, respectively.

It has given 10.9% positive returns in 1 month. Whereas, in 3 months, it gave 12.78% positive returns. Over a year, it gave 32.87% positive returns. In the past 3 years, it has given a multibagger return of 268.09% and in the past 5 years, 46.35% positive returns on investments. It has given good returns over the long-term investment period.

Revenue improves on higher order execution

For Q2FY23, GPIL's revenue came in at Rs2,186mn, up 16.9% QoQ and 23% YoY. EBITDA at Rs169mn was 17.8% higher QoQ and 16.1% YoY, while EBITDA margin at 7.7% was flat QoQ. PAT at Rs102mn was up 55.6% YoY and was substantially higher in Q2FY23 vs the Rs7mn clocked in Q1FY23. Management expects semiconductor supplies to normalise in the next 3-6 months leading to significant increase in order execution in H2FY23. Finance cost has reduced on the back of lower working capital borrowings, which were elevated during the covid period (due to delay in payments from discoms). Since the payments have improved substantially, working capital borrowings have correspondingly reduced.

Guidance for FY23 maintained

Company has maintained its FY23 revenue guidance at Rs10bn and EBITDA margin at 12-13%. Management expects EBITDA margin to return to normalised levels (15-16%) by FY24.

Orderbook at Rs17.6bn

Orderbook at Q2FY23-end stood at Rs17.6bn, which includes: 1) Rs2bn for supply of conventional electronic energy meters, 2) Rs7.5bn for supply of smart meters, 3) Rs1bn in export orders, and 4) balance related to FMS and AMI-SP (advanced metering infrastructure service provider) installations. Meter supplies for the Bihar AMI-SP order will start in Nov'22. GPIL currently has 100% share in the supply of smart meters to Adani distribution areas.

Rs 667bn worth of tenders expected to be awarded in the near term

Tenders worth a total of ~Rs667bn are currently open (live plus upcoming). Of this, tenders totaling Rs360bn are currently live and GPIL has bid as the sole system integrator (AMI-SP) for 30% of them. In the balance 70%, GPIL has participated as part of the AMI-SP collaboration and will supply smart meters to the project. Company has participated in conventional meter tenders to the tune of Rs7.26bn and will participate in Rs10.45bn worth of upcoming conventional meter tenders. It has also participated in smart meter tenders worth Rs9.5bn. Several states have floated tenders for smart metering implementation, including UP, Gujarat (through PGCIL), Delhi (BRPL & BYPL), Tamil Nadu, Jharkhand and Puducherry. Additionally, Rs200bn worth of tenders under the TOTEX model are expected to be floated over the next 2-3 months from Madhya Pradesh, Maharashtra, Mizoram, West Bengal and Chhattisgarh among others.

Valuation

ICICI Securities on the valuation of the stock, said, "We maintain our BUY rating on GPIL and target price of Rs107, valuing the stock at 20x FY24E EPS of Rs5.4/sh. At the CMP of Rs83/share, the stock is trading at 15.4x P/E and 2.1x P/B on FY24E basis."

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective 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 making any investment decision.