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Metering the smart way!

Genus Power Infrastructures (GPIL) is a leading smart meter solutions provider in India, with a total manufacturing capacity of 10mn meters p.a. It is the largest listed smart electricity meter company in India and provides end-to-end services including set-up of Advanced Metering Infrastructure (AMI) and Facility Management Systems (FMS) post implementation. With >25% Pan-India market share in meters, GPIL is set to become one of the largest beneficiaries of upcoming smart meter installation drive under the Rs3trn revamped distribution sector scheme (of which 50% is for smart meters).

The scheme targets installation of 100mn and 250mn prepaid smart meters by Dec’23 and Mar’25 respectively, replacing conventional meters and structurally transforming the financial dynamics of the power sector. With only 2.8mn smart meters installed as at Aug’21, we believe the opportunity size is huge though the pace of execution is key. We initiate coverage with a BUY rating and target price of Rs117.

* Largest listed smart meter player in India with >25% market share: With a total meter manufacturing capacity of 10mn meters p.a., GPIL is a leading smart meter solutions provider in India. Its market share in electrical meters is >25% (both conventional and smart). Further, its market share among private discoms is >65%. GPIL provides end-to-end solutions including AMI and FMS, and is also venturing into gas meters. Between FY15-FY21, it manufactured 38.4mn conventional and 2.4mn smart meters. Exports account for ~10% of its annual revenues, but has been hit due to covid. FY21-end orderbook of Rs9.3bn was composed of 22% conventional meters, 47% smart meters, 18% FMS and 13% others. Orderbook as at Q1FY22-end was Rs9.8bn.

* Big upcoming domestic opportunity size for smart meters: The recently announced Rs3trn distribution sector reform scheme targets installation of up to 100mn and 250mn prepaid smart electricity meters by Dec’23 and Mar’25 respectively (50% of capex is towards smart meters). This will replace the conventional meters (250mn currently) and structurally transform the financial dynamics of the discoms. With only 2.8mn smart meters installed till Aug’21, we believe the upcoming scope is huge and GPIL is likely to be among the frontrunners participating in the tenders. This may also result in growth in FMS, which can have recurring revenue potential for the company.

* Focus on corporate governance with business restructuring and strengthening the Board of directors: GPIL is restructuring itself and demerging its non-core businesses to focus solely on providing metering products and solutions. Further, it has onboarded eminent personnel on its Board, including Subhash Garg (former finance secretary and power secretary of India) and Keith Torpy, a veteran in smart metering technology and product development.

* Valuations and risks: We value GPIL at 20x FY24E EPS of Rs5.8/share and initiate with a BUY rating and target price of Rs117. At CMP of Rs63/share, the stock is trading at 10.7x P/E and 1.5x P/B on FY24E basis.

Key risks: 1) further lockdowns affecting project implementation and supply chains, 2) slower than anticipated pickup in tendering activities, 3) non-cooperation by states to implement the revamped distribution sector scheme, 5) significant increase in commodity prices.

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