By laksh5382 
Shares of power transmission and distribution company GE Vernova T&D India Limited are on fire. Reaches new 52-week high 2,180 on Friday, calendar year-to-date returns are now a massive 330%.
On Thursday the company received orders worth more than this ₹400 crore from Sterlite Grid 32 Ltd. for supply and supervision of high-voltage equipment for the tariff-based competitive-bidding project. Earlier this month, it also received orders worth approx Rs 400 crore from Sterlite Power for supply of power transformers and reactors. The company will supply and maintain 765 kilovolt power transformers and reactors for Khavda.
The flow of new orders is favorable as it helps in expediting orders and increases the revenue visibility of the firm. Also, its parent company is outsourcing a part of the work to the Indian unit. In the September quarter (Q2FY25) it received approx 2,500 crore orders from its parent company, an increase of almost ten times on a year-on-year basis. As a result, total order flow increased during the quarter 4,700 crore, more than three times the average orders received in the last four quarters.
The commentary is encouraging. The company hopes that Annual order flow of Rs 6,000 crore, excluding large HVDC projects. The order backlog for the company reached approx. ₹10,000 crore at the end of Q2, up 57% from end of FY24 and 2.6x trailing twelve month revenue. export order Management said during the earnings call that margin growth was driven by improved profitability for several product lines. Exports now account for 40% of the orderbook, up from 20% a year ago.
Although these big projects are still in the bidding process, there is a possibility of delay in them. Impressive performance with Ebitda in Q2FY25 2,000 crore, up 238% year-on-year, exceeding Bloomberg consensus estimates. Due to this, brokerage firms made rapid changes in their earnings estimates. “We raise our execution estimates for FY25F/FY26F/FY27F by 3%/4%/6% to take into account the strong order inflows and strong beat in 2Q. “We estimate earnings CAGR of 78% over FY24-27F,” Nomura Global Markets Research results review report said.
Still, its expensive valuations suggest the stock may be running ahead of its earnings, trading at 76 times estimated earnings for fiscal 2026, according to Bloomberg data.
Interestingly, the stake sale promoter group Reducing its total stake from 75% to 51%, in two tranches over the last four months, has not affected investor sentiment.
“We need to keep an eye on the pace of new orders ( Rs 5,500-6,000 crore per annum is the normalized business run-rate over the next two-three years) coupled with stability/ramp-up of OPM (operating profit margin) levels, which remain the key triggers for the stock from here,” According to Nuvama research report.
The Company remains vulnerable to the risk of volatility in raw material prices. Its raw material/sales ratio stood at around 60% in Q2FY25, the lowest in the 60-75% band recorded in the last ten quarters. Metal prices are currently under pressure due to high imports, and the imposition of ‘safeguard duty’ under consideration of the government could significantly impact domestic prices.
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