Buy GE Vernova T&D Ltd for the Target Rs 5,300 by Emkay Global Financial Services Ltd
GVTD is well positioned to capitalize on structural growth in the power transmission sector, supported by strong prospects across both its domestic and export businesses. This is underpinned by:
1) ~Rs10bn of capacity expansion planned through FY28, which should enhance its ability to cater to growing demand
2) strong support from its parent (GE), providing consistent access to new technologies and enabling faster localization for the Indian market
3) a robust balance sheet, with a net cash position of Rs29.3bn as of 1QFY27-end and healthy cash-flow generation averaging ~Rs10bn over the past 3 years
4) favorable working-capital dynamics, with NWC maintained at ~50 days over the last 3 years. Collectively, these factors provide GVTD with financial flexibility, technological edge, and capacity readiness, which we believe will help the company deliver earnings CAGR of 25% over FY26-29E. We retain BUY and raise TP by ~7% to Rs5,300 from Rs4,950.
Domestic business: Well prepared to capitalize on T&D capex opportunity
The domestic business has delivered a robust ~29% CAGR over FY23-26, driven by healthy demand in the power transmission segment. To sustain this growth momentum, the management has announced a capex program of over Rs10bn through FY28, which includes new manufacturing lines for a) HVDC LCC valves and VSC-STATCOM valves; b) transformers and related accessories; and c) engineering and testing lab. This would enhance GVTD’s localization capabilities and improve its competitiveness in upcoming transmission projects, thereby strengthening its positioning for order wins. The nearterm opportunity remains encouraging, with PGCIL recently emerging as the L1 bidder for the Barmer-South Kalambh HVDC. GVTD is among the two key players well positioned to potentially secure the project, providing a meaningful near-term growth catalyst.
Export business: Strong global value chain opportunity
The export business has delivered a robust ~34% CAGR over FY23–26, with its contribution to consolidated revenue at ~33% in FY26, underscoring the company's increasing integration into the global value chain. Revenue from intra-group sales surged 123% yoy to Rs17.6bn in FY26, accounting for 85% of the company's FY26 export revenue. The management expects a large data center related order (Rs13bn) from its US group entity to be awarded in 2HFY27, which could act as a meaningful growth catalyst for the export business. Additionally, the recent US restrictions on imports of power equipment from China are expected to accelerate supply chain diversification in favor of alternate manufacturing locations. These developments position GVTD well to capture a larger share of the group's global sourcing requirements.
View and valuation
GVTD has a strong net cash position of Rs29.3bn as of 1QFY27, supported by healthy operating cash flow generation. This provides flexibility to fund planned capex, support incremental working capital requirements, and pursue further growth opportunities, while sustaining a healthy payout ratio of ~20%. We retain BUY and raise TP by 7% to Rs5,300, as we roll over our exit multiple to Sep-28E, valuing the stock at 60x PER (unchanged)
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