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PAT boosted by better-than-expected other income and lower tax rate

* Hitachi Energy’s revenue for 2QFY26 was 12% lower than our estimates as execution remained weaker-than-expected during the quarter. However, with a better-than-expected EBITDA margin of 16.3%, higher other income, and a lower tax rate, reported PAT came 42% ahead of our estimates.

* Revenue grew 18% YoY to INR18.3b (vs. our estimate of INR20.9b), led by effective order execution and improved operational efficiencies.

* EBITDA at INR3.0b (vs. our estimate of INR2.5b) grew 172% YoY. EBITDA margin at 16.3% was 430bp above our expectation of 12%, driven by lower-than-expected RM costs, employee costs, and other expenses.

* PAT increased 406% YoY to INR2.6b, which was above our estimate of INR1.9b.

* Order inflows grew 14% YoY to INR22.2b, taking the order book to INR294b. Growth in inflows was led by the large orders for gas-insulated switchgear (GIS) and air-insulated switchgear (AIS) stations and locomotive transformers. In terms of segment, industries and renewables were the key contributors to the order book, followed by transmission and transport.

* For 1HFY26, the company reported revenue/EBITDA/PAT growth of 15%/188%/531% YoY.

* Operating cash inflow came in at INR8.7b vs. an outflow of INR0.8b in 1HFY25. FCF stood at INR807m in 1HFY26 vs negative INR118.1m in 1HFY25.

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