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Multi-year high gross margin on a slower revenue growth

Our view

GETD reported PAT much ahead of expectations driven by multi-year high gross margin (above the higher end of the guidance). Revenue growth disappointed with flat YoY revenue with both domestic and export revenue growth moderating significantly from Q1FY24. Order Inflow crossed Rs10bn for the second straight quarter (above the Rs7bn quarterly run-rate in FY23). A significant net debt reduction would provide leverage to the bottom line in up coming quarters.

Looking forward

GETD order inflow and margin have remained exceptionally strong compared to its recent past. Management expects order inflow run rate to remain at similar levels (over Rs10bn) in the next 12 months based on the tender visibility. They also target a gross margin in the range of 30-35%. Surprises on the upside (for gross margin) remain based on the possibility of large HVDC related domestic and export orders, benign commodity prices and higher share of service/software revenue share. While margin and order inflow have been sturdy, revenue growth is yet to see meaningful improvement, which also remains a key monitorable. We are building in a 20% revenue CAGR and expect EBITDA margin to inch up to close to 9% in FY25E. Despite aggressive assumptions, we remain SELL with a revised target price of Rs315 based on 35x FY25E EPS.

Result Highlights

* Sales came in at ~Rs7.2bn (up 21% YoY) (YSLe: Rs6.1bn)

* Gross margins came in at 31.7%, ~280bps YoY contraction

* EBITDA grew by 127% YoY at Rs508mn (YSLe: Rs244mn) led by operating leverage benefits. Margins saw a ~330bps YoY expansion at 7.1%

* PAT came in at Rs282mn (YSLe: Rs64mn) which was a 344% YoY growth on account of strong operational performance

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