Power Transmission & Equipment Stock Plans Rs. 1.4trn Investment, Buy Stock For Sharp Return

Top brokerage firm ICICI Securities has given a buy rating to the stock of GE T&D India. It is a small-cap Power Transmission & Equipment stock with a market capitalization of Rs. 3,405 crore. As per the ISTS expansion plan, investment of Rs. 1.4trn is expected over FY23-27 in transmission space, including Rs. 373bn over FY23-FY24, mainly through TBCB route.

Stock To Buy: Target Price

The Current Market Price (CMP) of GE T&D India is around Rs. 130. ICICI Securities has estimated a Target Price for the stock at Rs. 153. This stock has the potential to give a 17.69% return, in the upcoming 12 months.

Stock Outlook
Current Market Price (CMP)	Rs. 130
Target Price	Rs. 153
Potential Upside	17.69%
52-week high share price	Rs. 143.55
52-week low share price	Rs. 81.45

Revenue, EBITDA and net debt

GE T&D India's (GETD) revenue declined 18% YoY to Rs. 7bn in Q2FY23 as weaker order book led to muted execution. Gross margin improved 51bps YoY, however, contracted 760bps QoQ to 26.9%. EBITDA decreased 12% YoY to Rs. 174mn. Net debt during the quarter increased by Rs. 1.7bn to Rs. 3.6bn on account of higher working capital led by higher inventory and payables. Order inflow declined 23% YoY to Rs. 4.9bn, mainly due to deferment of awards worth Rs. 5bn. The current order book stands at Rs. 34.5bn (1.2x TTM sales).

Stock Valuation

Maintaining a buy rating, ICICI Securities said, "We expect execution to pick up in FY24-end. We expect gross margin to gradually improve as commodity prices have now softened. Factoring in weak H1 performance on both execution and margin front, we cut our EPS estimates for FY23E/24E. We roll forward our valuations to FY25E and maintain our buy rating on the stock with a target price of Rs. 153 based on 25x FY25E EPS."

Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. 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.