Add Hitachi Energy Ltd for the Target Rs 35,100 by Emkay Global Financial Services Ltd
We assume coverage on Hitachi Energy India (POWERIND) with ADD and TP of Rs35,100, valuing the stock at 65x its Jun-28E EPS. Hitachi delivered a healthy 1QFY27 performance. It registered revenue growth of 68.6% yoy to Rs24.9bn (our estimate: Rs23.4bn) driven by disciplined execution of orders and sustained demand across key segments. Adjusted EBITDA margin (adjusted for m-t-m FX loss of Rs360mn) rose 550bps to 16.0% (our estimate: 16.2%), led by operating leverage. Adj PAT rose 136% yoy to Rs3.1bn (our estimate: Rs3bn). The company registered order inflows of Rs51bn (-55% yoy; excluding HVDC order, order inflow grew 26% yoy). The order book remains healthy at Rs322.2bn (+10.6% yoy), with a promising order pipeline.
Healthy overall performance
Hitachi reported healthy revenue of Rs24.9bn (+68.6% yoy; est Rs23.4bn), led by effective order execution and sustained demand across segments. Gross margin contracted 380bps yoy to 40.6%. Despite this, adjusted EBITDA margin expanded 550bps yoy to 16.0%, owing to operating leverage. Absolute EBITDA came in at Rs4.0bn (+158% yoy). Adjusted PAT stood at Rs3.1bn (+136% yoy). During the quarter, HITACHI executed key projects such as a GIS substation (iron ore plant, Chhattisgarh), a 220kV switchyard (Damanjodi, Odisha), a 220kV GIS (Mumbai), and the 1,000 MW Kurnool HVDC project (Maharashtra).
Revenue booking remains strong; order book at record high
Hitachi reported order inflow of Rs51bn. (+26% yoy excluding HVDC order). Order backlog stood at a record high of Rs322.2bn. Key wins during the quarter include a BESS order, a 2GW wind evacuation project in Europe to the tune of Rs17bn, and multiple data center orders from hyperscalers. Key sectors offering healthy domestic growth opportunities are data centers, HVDC, and renewables. Hitachi is also focusing on scaling up exports and services revenue and hopes to see exports contribute 25-30% of its revenue
Emerging verticals BESS and data center
Hitachi is actively building out two emerging growth verticals battery energy storage systems (BESS) and data centers. In BESS, the company secured its first order during the quarter, a 165MW/330MWh project in Andhra Pradesh for a C&I customer. In data centers, the company is capitalizing on strong hyperscaler-driven demand, securing multiple orders during the quarter including a 42.5 MVA project in Hyderabad largely centered on long-lead items such as transformers and gas-insulated switchgear (GIS).
Investment summary
We assume coverage on Hitachi Energy India (POWERIND) with ADD and TP of Rs35,100, valuing the stock at 65x its Jun-28E EPS.
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