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Motilal Oswal Report
We continue to expect steady ordering activity in the power transmission and distribution space based on our meetings with six players focused on T&D space and analysis of nearly 12 players commentaries on this space.
Also, the pipeline of projects approved by the Central Electricity Authority of India stands robust for next two-three years. This is likely to be positive for most players in the value chain for the next four-five years. This is likely to be positive for most players in the value chain for the next four-five years.
The capex-intensive nature of the value chain and high entry barriers for new players should restrict competition to a few players having control over the supply chain.
As a result, these companies can either maintain their market share or improve it over the next few years. This is also likely to result in 15-20% growth in T&D or energy segment inflows and revenues.
The scope for margin improvement in the near term is high for Siemens, Hitachi Energy, GE T&D, ABB, and transformer companies.
In our coverage universe, we maintain Buy on ABB India Ltd. (target price: Rs 7,500), Siemens Ltd. (target price: Rs 6,050), Kalpataru Projects International Ltd. (target price: Rs 1,200), and Larsen and Toubro Ltd. (target price: Rs 4,400).
We would be more comfortable at lower valuations on Hitachi Energy India Ltd. (Sell target price: Rs 5,466) and KEC International (Neutral: target price: Rs 710).
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