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ICICI Securities
GE T&D (Buy)
Target: ₹146
CMP: ₹130.50
GE T&D India witnessed a 10 per cent y-o-y growth in revenues to ₹1,030 crore during Q3-FY21, mainly driven by exports, which contributed 25 per cent of revenues in 9M-FY21.
Improvement in working capital supported net debt reduction, which reduced to ₹175 crore from ₹443 crore in September 2020. Other income grew 85 per cent y-o-y to ₹22.8 crore supported by ₹12 crore of warranty provision readjustment ₹6-7 crore of tax provision reversal.
Although green energy corridor-related ordering was slow in Q3-FY21 as only five packages were finalised in the quarter, we believe, this will pick up going forward. The ordering activity from state government has picked up and green energy corridor tenders are expected to gain traction. Due to the recent stance of the government to encourage localisation, we believe, domestic market share of the company is likely to improve.
The focus on self-reliance is expected to support market share gains for localised players like GE T&D under automation, statcom, GIS and transformers. Factoring in better-than-expected execution/earnings and improvement in cashflow, we raise FY21 and FY22 earnings by 17.5 per cent and 3 per cent, respectively, and upgrade the stock to Buy from Add with a revised target price of ₹146 (earlier: ₹122).
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