Sell GE T&D India Ltd For Target Rs. 112 - Yes Securities
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Dismal performance on all fronts
Our view
GE T&D India Ltd (GETD) reported a disappointing set of numbers with revenues missing our estimates at Rs7bn (up 6% YoY). EBITDA came in at Rs279mn vs a loss in 4QFY22. After 3 consecutive quarters in the green, the company reported a loss at the PAT level. Order inflows in 4QFY23 at Rs8.7bn grew by 58% YoY. As on 4QFY23 order book stands at ~Rs37bn (1.3x TTM revenue), providing revenue visibility for ~18 months. Going forward management expects activity to be somewhat subdued by the end of FY24 owing to general elections.
We believe challenges in the form of rising commodity prices have largely eased and margin recovery would be contingent upon cost rationalization measures. However, we expect 1) strong order pipeline, 2) pickup in order inflows and 3) execution ramp up, to benefit GETD in the long run. Given the sharp run-up in the stock price, we believe GETD is trading at demanding valuations of 70.8x/36.9x FY24E/25E EPS. Accordingly, we downgrade our rating to SELL with a revised TP of Rs112.
Result Highlights
* Sales came in at ~Rs7bn (up 6% YoY) (YSLe: Rs8.6bn) on account of poor dispatches
* Gross margins came in at 26.5%, ~390bps QoQ contraction
* EBITDA came in at Rs279mn (YSLe: Rs589mn) on account of weak gross margin. Margins saw a ~190bps QoQ contraction
* Adj. PBT came in at Rs43mn vs a loss of Rs1.4bn in 4QFY22. There was an exceptional loss of Rs44.6mn pertaining to provision for severance costs and VRS
* Adj net loss came in at Rs109mn vs a loss of Rs1.3bn in 4QFY22
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