PL Stock Report: GE T&D India (GETD IN) - Q1FY24 Result Update - Healthy outlook; focus on execution, margins - HOLD

GE T&D India (GETD IN) - Amit Anwani - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: HOLD | CMP: Rs273 | TP: Rs260

Q1FY24 Result Update - Healthy outlook; focus on execution, margins

Quick Pointers:

♦ Order inflow came in at Rs10.1bn (up ~68% YoY).

♦ Total addressable market for GETD excluding HVDC stands at ~Rs250bn for FY24.

We revise our FY24/25E EPS by 52.2%/17.7%, factoring in lower employee cost (as per guidance), strong tendering prospects in T&D and execution pickup of existing order book. GE T&D (GETD) reported strong quarterly performance with revenue growth of ~21% YoY and EBITDA margin expansion of 330bps YoY to 7.1%. Net debt has reduced substantially by Rs560mn QoQ to Rs1.2bn due to better cash flows. Management has been focusing on project selection, operational efficiencies, optimizing employee cost and profitability over revenue and market share. Domestic addressable market ex. HVDC stands robust at ~Rs250bn for FY24. On exports front, there is good traction from US and European markets, where GETD is working with customers on product qualification.

We believe, healthy order pipeline, strong order book (Rs39.4bn) and management’s focus on margin improvement augers well for medium term revenue and profit growth. The stock is trading at PE of 48.8x/31.5x FY24/25E. We maintain Hold rating on stock with TP of Rs 260 (Rs184 earlier) valuing it at PE of 30x FY25E (25x earlier), owing to healthy outlook and management focus on cost optimization and reducing debt levels.

Strong operating performance drives PAT: Sales grew 21% YoY to Rs7.2bn, (PLe 6.8bn), driven by strong execution. EBITDA grew 126.9% YoY to Rs508mn, (PLe Rs314mn) with EBITDA margin expanding 330bps YoY to 7.1% (PLe ~4.6%), mainly due to prudent cost management (employee cost as % of sales down to 12% vs 15.3% in Q1FY23 and other expenses as % of sales down to 12.6% vs 15% in Q1FY23). Adj. PAT came in at Rs282mn (vs Rs64mn in Q1FY23 and above PLe of ~Rs113mn), mainly due to strong operating performance. Most of the other income (Rs120mn) in Q1FY24 is related to forex gains, 40-50% of which is realized gains.

Order book stands strong at Rs39.4bn: Order inflow came in at Rs10.1bn (up ~68% YoY) comprising of domestic order inflows of ~78%. Key orders booked during the quarter include: 1) Supply of 765 kV GIS & 400 kV GIS to Power Grid Corp. of India for their projects in Raigarh and Kotra; 2) Supply of 12 x 765 kV, 110 MVAR Shunt Reactors and 4 x 400kV, 41.67 MVAR Bus Reactors from a private transmission company. Order book stands at Rs39.4bn, (1.4x TTM revenue), comprising of Private (~72%), State utilities (~11%), Central Utilities and PSU (~17%).

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