PL Stock Report: GE T&D India (GETD IN) - Q2FY24 Result Update – Healthy Q2; focus on improving profitability - HOLD

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

Rating: HOLD | CMP: Rs386 | TP: Rs367

Q2FY24 Result Update – Healthy Q2; focus on improving profitability

Quick Pointers:

♦ Order inflow came in at Rs10.8bn up 122.6% YoY, driven by continued strong demand.

♦ Order prospects continue to remain strong for next couple of quarters from AIS, GIS substation, power transformers and grid automation.

We revise our FY24/25E estimates upwards by 26.5/21.8%, factoring in EBITDA margin expansion and strong demand outlook. GE T&D (GETD) reported decent quarterly performance with revenue flat at Rs7bn and EBITDA margins coming in at 8.7% driven by focus on operational efficiencies, streamlining resource allocation and enhancing execution capabilities. Net debt has reduced sharply to Rs114mn vs Rs1.7bn in March 2023, driven by better cash flows and working capital situation. Going forward, management will be focusing on healthy profitable orders, better productivity, cost controls and working capital improvement. Management expects healthy order intake on the back of major traction in HVDC ordering in the medium term.

We believe healthy order pipeline, strong order book (Rs43.4n) and management’s focus on margin improvement augers well for medium term revenue and profit growth. The stock is trading at PE of 54.6x/36.6x/27.7x FY24/25/26E. We roll forward to Sep’25E, and maintain ‘Hold’ rating on stock with TP of Rs367 (Rs260 earlier) valuing it at PE of 30x Sep’25E (30x FY25 earlier).

Gross margins expansion aids profitability: Sales remained flat broadly at Rs7bn, (PLe 8.6bn), driven by continued traction in execution. EBITDA came in at Rs606mn, (PLe Rs662mn) with EBITDA margin coming at 8.7% vs 0.8% in Q2FY23, (PLe 7.7%), mainly due to better gross margins (36.6% vs 25.2% in Q2FY23- Low base). Adj. PAT came in at Rs372mn (vs Rs86mn in Q2FY23) (PLe of ~Rs376mn), mainly due to strong operating performance.

Order book stands healthy at Rs43.4bn: Order inflow during the quarter came in at Rs10.8bn up 122.6% YoY, driven by continued traction from, GIS substation, power transformer and grid automation. Key orders bagged during the quarter includes 1) Package for supply of 110 MVAR 765 kV Reactors and 125 MVAR 400 kV Reactors from Sterlite Power 2) Construction of 765/400 kV GIS Substation at Narendra & 765 kV Bay Extension at Pune including civil works from Adani Energy Solutions 3) Export order for supply of 225 kV GIS to Senegal 4) Turnkey Contract for 400 kV substation at Sholapur, Maharashtra from Renew Power, etc. Order book stands healthy at Rs43.4bn (1.5x TTM revenue) comprising of Private (75%), state utility (10%) and Central Utilities (15%).

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