Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

HDFC Securities Institutional Research Desk: Report on Hitachi Energy - Building on electrification

Posted On: 2023-03-24 12:59:25 (Time Zone: IST)

Parikshit D Kandpal, CFA, Institutional Research Analyst, HDFC Securities and Nikhil Kanodia, Institutional Research Analyst, HDFC Securities.

Looking at the government and private capex spending plans, Hitachi Energy India (HEI) seems to be one of the biggest beneficiaries of a large surge in power sector capex due to EVs, metro/high-speed rails, etc. HEI is one of the top technical players in the electrical engineering space having four business units namely, grid automation, grid integration, high voltage products and transformers. Its revenue is expected to expand through (1) grid automation and modernisation; (2) rail electrification; (3) expansion in the metro network; (4) rise of e-mobility; and (5) hyper growth in data centres. It has another INR 50bn revenue opportunity from Vande-Bharat ancillary orders. Given robust order inflows, we expect HEI FY22-25E EPS CAGR of 67.9%. We initiate on HEI with an ADD rating (given punchy valuation), with a TP of INR 3,438/sh, valuing the company at 38x Mar-25E EPS.

Robust growth drivers: HEI's sustainable energy solutions and products are expected to gain good traction, backed by India's target to be net-zero by 2070, robust order inflow from the metro and high-speed rail projects, electrification of balance 8,798 Rkms of Indian railways, growth in data centers, increased adaptability of the e-mobility ecosystem, modernisation and automation of existing grids.

Meeting export target well before time: HEI had guided for exporting a quarter of its OB in the long run. It has more than 20% of new OB from international demand for all the three quarters of FY23. It has orders from countries like Nepal, Bhutan, the Middle East, and America. Currently, ~80% of the HEI portfolio products are manufactured locally in India.

Services potential to grow to INR 20bn in long run: HEI expects an annual market potential for its services to be c.INR 20bn in the long run backed by its large installed base in the country. Further, it expects services to constitute 10- 15% of its order mix from current levels of 5% (Q3FY23).

Double-digit margin expected by FY25: The 9MFY23 EBITDA margin came in at 4.5% (-170bps YoY). With robust growth in export orders, focus on high[1]growth segments, local manufacturing and strong market potential from services orders, HEI expects the mid-term EBITDA margin in double digits.

Technical service agreement (TSA) expected to come down gradually: HEI pays a royalty of 3.5% of its revenue to Hitachi global for using its technical know-how. Further, it pays TSA to ABB for using its information system (IS) infrastructure. HEI has guided it would bring down TSA charges gradually as and when HEI deploys its own IS infra.

Robust OI; well-diversified order mix: The 9MFY23 order inflow (OI) came in at INR 55.5bn (+2.1x YoY), taking the order book (OB) to INR 72.3bn (~1.7x FY23E revenue), providing good revenue visibility in the near term. Segment[1]wise, the order mix is well-diversified into products/projects/services at 85/10/5%. Sector-wise, it is diversified into utilities/industries/transport and infra at 56/22/22%.

Shares of ABB Power Products and Systems India Limited was last trading in BSE at Rs. 3364.30 as compared to the previous close of Rs. 3249.55. The total number of shares traded during the day was 1573 in over 480 trades.

The stock hit an intraday high of Rs. 3433.20 and intraday low of 3198.80. The net turnover during the day was Rs. 5254381.00.

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

CRISIL Ratings: Higher workplace occupancy to light up cigarette volume 7-9%

CRISIL Ratings: Apparel retailers to grow 7-8% this fiscal via expansion, festival spur

CRISIL Ratings: For tea companies, ~8% revenue degrowth brewing this fiscal

CRISIL Ratings: Revenue of paper makers to crumple 8-10% this fiscal

ICRA expects banking sector to stay resilient, outlook remains Positive

CRISIL MI&A: Red-hot domestic demand to stave off steel price melt this fiscal

CRISIL Ratings: Replacement demand to drive tyre volume up 6-8% this fiscal

CRISIL Ratings: Home textiles makers to weave revenue, profitability rebound this fiscal

Capital outlay on roads, renewables seen rising ~35% in this and next fiscals to Rs ~13 lakh cr, backed by strong execution pace

Softening demand to moderate Indian IT services industry growth to 3-5% in FY2024: ICRA

CRISIL Ratings: Telcos may dial up Ebitda 15-17% to Rs 1.2 lakh crore this fiscal

CRISIL Ratings: Social welfare spend of states to hit a decadal high this fiscal

CRISIL Ratings: Footwear sector revenue to tread ~11% higher this fiscal

CRISIL Ratings: Robust demand to whip up dairy industry revenue 14-16%

Indian hospital industry's operating profit margin will remain healthy at over 22% in FY2024: ICRA

Weak overseas demand to snip 5-6% off jute revenue this fiscal - CRISIL

ICRA expects the telecom services industry to report moderate revenue growth of around 7-9% in FY2024 amid high capex spends

CRISIL - Viscose staple yarn makers set for 10-12% revenue growth this fiscal

Sugar mills seen unscathed despite pricier cane, lower exports - CRISIL

CRISIL Ratings: Specialty chemicals on domestic drive, revenue seen growing 6-7%

CRISIL Ratings: Higher ad spends to lift revenue 13-15% for print media this fiscal

Paytm: Top brokerages, such as ICICI Securities, Axis, Dolat lift Paytm's target price to Rs. 1250

CRISIL Ratings: Securitisation volume surges 60% to first-quarter peak

CRISIL Ratings: FMCG sector to witness 7-9% rise in revenue this fiscal

CRISIL MI&A and ATMA: Tyre industry on a roll, driving towards doubling in size

CRISIL Ratings: Slowing US, EU to chip 6-8% away from handicraft sales this fiscal

CRISIL MI&A: One out of five MSMEs to see stretch in working capital days

Yes Securities Identifies Rural India as Key Driver of Economic Recovery in Latest Report

CRISIL Ratings: Revenue of automotive component makers to grow 10-12% this fiscal

CRISIL: Residential real estate sales to grow 8-10% this fiscal

CRISIL MI&A: Cement prices to dip 1-3% this fiscal despite healthy demand

CRISIL Ratings: Aircraft MRO services revenue could leap 3x in 5 fiscals

Demand pressures to moderate revenue growth of Indian fashion retail entities to 10% in FY2024: ICRA

CRISIL Ratings: Revenue of organised gold jewellers to rise 16-18% this fiscal

CRISIL Ratings: Revenue of top 18 states to grow at 6-8% this fiscal

Automobile Sector - Monthly Quick View - May'23 - Steady YoY and MoM Growth on Low Base; UVs are Clear Winner...

CRISIL Ratings: New guidelines lend much-needed clarity to FLDG usage

MSP for kharif crops - Views of Pushan Sharma, Director - Research, CRISIL Market Intelligence and Analytics

PMI Services logs a record high, Employment scenario, however, remains a concern

Road construction to witness 16-21% jump in FY2024, ahead of General Elections: ICRA

Sustained demand momentum to drive double-digit revenue growth for the Indian hotel industry in FY2024: ICRA

HCL Technologies Ltd - Q4FY23 Result First Cut - A marginal miss on major parameters, though PAT beats expectations

Indian quick-service restaurant industry to witness strong growth in near to medium term with expected ramp-up in store additions: ICRA

HDFC Securities Institutional Research Desk: Report on Infosys - On the back foot

Infosys Ltd. Q4FY23 Result First Cut - A miss on all fronts

Healthy credit growth of NBFCs and HFCs led to highest post-pandemic quarterly securitisation volumes in Q4 FY23, estimated at ~Rs 61,000 crore: ICRA

Impact of Monsoon forecast on Markets - Reliance Securities

HDFC Securities Institutional Research Desk: Report on Kolte Patil Developers - Premiumisation to drive the next leg of growth

Operating margin of domestic base metal entities to remain range-bound at 19-20% in FY2024: ICRA

HDFC Securities Institutional Research Desk: Report on QSR Thematic - QSR: Fishing time?

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020