Buy GE Vernova T&D Ltd for the Target Rs 5,300 by Emkay Global Financial Services Ltd
GVTD delivered robust operational performance for 2QFY27, with strong print across key parameters. Revenue at Rs20.3bn (+31.8% yoy) stood in line with our estimate, while EBITDA at Rs5.5bn (+38.7% yoy) and margin of 27.1% (+135bps yoy) comfortably surpassed our expectation of Rs5.1bn and 25%, respectively. PAT at Rs4.3bn (+44% yoy) also beat our estimate of Rs3.8bn. Order inflow grew 51.8% yoy to Rs24.4bn, witnessing strong growth in both domestic (+44.2% yoy) and exports (+89.5% yoy), helping GVTD develop strong revenue visibility with backlog at Rs214.4bn (+63.6% yoy, 3x TTM revenue). CFO in 1HFY27 stood at Rs11.4bn, leading to cash equivalents of Rs32.5bn (+87% yoy). Business outlook remains promising, with three HVDC projects expected to be finalized in the near-to-medium term. Management remains confident of delivering >30% revenue growth for next couple of years, with healthy margin. We believe the recent correction provides a good opportunity to play the T&D capex theme. Thus, we retain BUY on GVTD with an unchanged TP of Rs5,300 (60x Sep-28E EPS).
Margin-led beat on operational front
GVTD’s 2QFY27 operational performance was a margin-led beat with our estimates. Revenue stood at Rs20.3bn (+31.8% yoy; Emkay: Rs20.3bn). Gross margin expanded by 91bps yoy to 44.5%, due to favorable product and geographic mix. EBITDA came in at Rs5.5bn, with margin expanding by 135bps yoy to 27.1%, in line with management’s guidance of mid-20s margin for the full year. PAT registered a healthy 44% yoy growth to Rs4.3bn, owing to higher other income (Rs503mn; +170% yoy) on the back of strong cash generation.
Robust order book provides strong medium-term visibility
Order inflow in 2QFY27 increased 51.8% yoy to Rs24.4bn, while order backlog grew 63.6% yoy to Rs214.4bn (ex Barmer HVDC order), providing robust revenue visibility of 3x its TTM revenue. Domestic inflow for 2QFY27 stood at Rs19.3bn (+44.2% yoy), supported by base orders, indicating healthy underlying demand, while export orders stood at Rs5.1bn (+89.5% yoy). 1HFY27 export inflows stood at Rs10.3bn (Rs11.8bn in FY26); thus, FY27 should comfortably surpass FY26 numbers as GVTD is in discussions to close a ~$151mn export order (transformers for US data centers), which it expects to potentially conclude in 2HFY27. Management remains confident of achieving Rs80bn base orders for FY27.
View and valuation
GVTD is well positioned to ride the multi-year T&D capex cycle. Orders from data centers stand low, at less than 2% of the total backlog; thus, the recent correction in the stock due to concerns of slowdown in DC capex globally is unwarranted, in our view. We retain BUY on GVTD with an unchanged TP of Rs5,300, valuing it at 60x Sep-28E EPS.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH0000003
