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Strong execution; poised for multi-year growth

Quick Pointers:

* GVTD announced Rs8.1bn capacity expansion, boosting transformer & reactor capacity by ~50% and GIS/AIS capacity by ~25%, to be completed by 2028.

* Management is confident of delivering mid-20s EBITDA margin for FY26.

We revise our FY27/28E EPS estimates upward by +7.4%/+12.1%, factoring in strong execution momentum and margin gains led by manufacturing efficiencies and a favorable product mix. GE Vernova T&D India (GVTD) reported a strong quarter with 38.9% YoY revenue growth and a 729bps YoY improvement in EBITDA margin to 25.8%. Management remains confident of sustaining mid-20s margins in FY26, supported by continued operational efficiencies and product mix advantages. With a healthy execution ramp-up and robust HVDC prospects (~4 projects lined up over the next two years), GVTD is well placed for multi-year growth, with any HVDC project conversions likely to further improve company’s profitability. To leverage the expanding T&D opportunity, the company has announced additional Rs8.1bn capex to augment manufacturing capacity of transformers, reactors and AIS/GIS supporting sustained growth momentum.

We believe 1) a healthy order pipeline in the power market, 2) a robust order book (Rs131.1bn), and 3) the management’s focus on margin improvement augur well for strong revenue & profit growth of GVTD. The stock is trading at a P/E of 65.5x/52.7x on FY27/28E. We roll forward to Sep’27E and maintain our ‘Accumulate’ rating with a revised TP of Rs3,531 (Rs2,706 earlier) valuing the stock at a PE of 65x Sep’27E (60x Mar’27E earlier) given the margin accretive product mix and strong multi-year T&D pipeline.

Higher mix of products in revenue aided margin expansion: Revenue rose 38.9% YoY to Rs15.4bn (PLe: Rs15.0bn) aided by strong execution in domestic business (+33.1% YoY to Rs10.5bn) as well as export business (+53.2% YoY to Rs4.9bn). Gross margin expanded by 239bps YoY to 43.6% (PLe: 42.3%). EBITDA grew by 93.7% to Rs4.0bn (PLe: Rs3.4bn). EBITDA margin increased by 729bps YoY to 25.8% led by gross margin expansion and lower employee costs (-1.3% YoY to Rs1.2bn). PBT increased by 107.1% to Rs4.0bn (PLe: Rs3.4bn) aided by significantly higher other income (+380.2% YoY to Rs186mn). PAT grew by 107.1% to Rs3.0bn (PLe: Rs2.5bn).

Robust order book at Rs131.1bn (2.6x TTM revenue): Q2FY26 order inflow came in at Rs16.1bn (-65.6% YoY against high base) with domestic/export mix of 83%/17%. Order book stands healthy at Rs131.1bn (2.6x TTM revenue) with a mix of Private/State Utilities/Central Utilities at ~69%/3%/29%.

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