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Beat on estimates

GE Vernova T&D’s(GVTD) 2QFY27 revenue, EBITDA and PAT were ahead of our estimates. Order inflows have also ramped up and were up 52% YoY at INR24b,resulting in an order book of INR214b. This was led by ordering ramp-up in domestic markets. Going ahead, we expect domestic ordering to remain healthy and export ordersfrom parent and nonparent entities to materialize in coming quarters. GVTD is optimistic about the finalization of more HVDC projects over next one year. We expect revenue contribution from existing HVDC project to commence mainly from FY28/FY29. We marginally raise our estimates by 7%/1% for FY27/28 to factor in 1HFY27 performance. We maintain BUY on GVTD with an unchanged TP of INR5,100, based on average of DCF and 58x P/E Dec’28E EPS.

In-line revenue, beat on profitability

GVTD’s 2Q revenue came in line with our estimates, while EBITDA and PAT came in above our estimates. Revenue increased 32% YoY to INR20.3b. Gross margin came in at 44.5%, up 90bp YoY. This, coupled with operating leverage benefits, led to EBITDA growth of 39% YoY to INR5.5b. EBITDA margin improved 130bp YoY to 27.1% vs. our estimate of 25%. Due to higher other income, PAT stood at INR4.3b, surging 44% YoY, beating our estimate by 16%. For 1HFY27, OCF increased by 88% YoY to INR11.4b, and FCF increased by 62% to INR9.3b due to higher capex spends. Order inflow for 2QFY27 was at INR24b, up 52% YoY, and order backlog stood at INR214b

Strong domestic ordering: Barmer HVDC and TBCB to lift future inflows

Order inflows rose 52% YoY to INR24.4b in 2QFY27, taking 1H inflows to INR35.8b (+11% YoY). Domestic orders formed ~71% of 2Q bookings (~INR25.4b), led by GIS and reactor packages for TBCB projects in Himachal Pradesh and Andhra Pradesh and a 1,500MW pumped storage hydro project in Maharashtra. The rebound follows a substantially stronger TBCB pipeline over the last three to four months, which is expected to stay healthy over the next four to five months. GVTD has also emerged L1 in Powergrid's Barmer HVDC project, likely to be booked over the next quarters. We believe the 2Q rebound confirms that 1Q weakness was timing-led, though delayed developer wins could keep quarterly inflows lumpy. We bake in a 23% CAGR in base ordering (ex-HVDC) over FY26-29E.

HVDC: A strong pipeline of 2-3 projects over the next year

Company expects at least two to three more HVDC projects by next year, though these are yet to be cleared by NCT, and no HVDC tender has been floated since Barmer project. GVTD’s addressable share is typically ~40-65% of project value, and is well-placed on localization requirements. Execution of both orders is back-ended, with no significant HVDC revenue expected over FY27-28. We believe the two HVDC orders, along with a healthy project pipeline, provide strong inflow and revenue visibility beyond FY28, with HVDC execution driving a meaningful acceleration in growth from FY29 onwards.

Financial outlook and valuation

We marginally revise our estimates by 7%/1% for FY27/28 to factor in 1HFY27 performance. Stock is currently trading at 49x/42x P/E on FY28/29. We maintain BUY on GVTD with an unchanged TP of INR5,100, based on average of DCF and 58x P/E Dec’28E EPS.

Key risks and concerns

Key risks include lower-than-expected growth in base orders, margin pressure, higher competition, and delays in execution ramp-up across HVDC projects.

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