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Target: ₹490
CMP: ₹328.90
We interacted with the management of Techno Electric and Engineering (TEEC) to take an update on the company’s new initiative, its data centre business, and the long-term opportunities which the company foresees.
TEEC has plans to develop ultra-scalable hyper-density data centres of 250MW by FY30 across India, starting with 36MW (capex of Rs13bn) in Chennai, followed by Delhi NCR, Maharashtra, Kolkata, Hyderabad and Bihar. Data centre market in India is expected to grow from about 870MW to 1,800MW by FY25.
With its data centre business, TEEC is expecting to leverage its in-house core competency in EPC and create a robust opportunity for executing third-party data centre projects. We expect the company to benefit with growth in order inflow led by expected data centre capex in the country.
We remain positive on TEEC with its asset-light business model (EPC RoCE 60 per cent in FY22), strong orderbook (OB) with 3.2x book/bill and strong balance sheet with cash of ₹1,200 crore. We incorporate equity value of Chennai data centre (expected equity IRR of about 12 per cent) and arrive at a revised SoTP-based TP of ₹490 (earlier: ₹461); maintain BUY on the stock.
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