Domestic brokerage house HDFC said looking at government and private capex expenditure plans, Hitachi Energy India (HEI) appears to be one of the biggest beneficiaries of the big jump in power sector capex due to EVs, metro/high-speed rail etc. Is. Securities in a research note.
Hitachi Energy:
HEI currently trades at higher valuations than most listed capital sound players, said the brokerage while initiating coverage on HEI with ‘Add’ rating and target price 3,438 per share.
“The higher valuations reflect the expectation of higher revenues from grid automation and modernisation, rail electrification, metro rail expansion, increased immobility, hyper-growth in data centres, and efficiencies in services.” 20 billion,” the note said.
The brokerage expects HEI to re-rate further with higher share of exports in OB and margin expansion. Currently, we value the company at 38 times 1-year forward PE multiple, it said.
At the portfolio level, HEIs are long expected to grow sector-wise market size led by the transportation sector – 2-3x, data centers – 4-5x, renewables – 4-5x, transmission – 2-3x.
Royalty at 3.5%
HEI pays a royalty of 3.5 percent of its revenue to Hitachi Global for using its know-how.
In addition, it pays ABB a technical service agreement (TSA) to use its information systems (IS) infrastructure. The Higher Education Institution has directed that as and when the Higher Education Institution deploys its own IS infra, it shall gradually reduce the TSA charges.
margin expansion
9MFY23 EBITDA margin came in at 4.5 per cent (-170 bps YoY). With strong growth in export orders, focus on high-growth segments, strong market potential from local manufacturing and services orders, HEI expects medium-term EBITDA margins to be in double digits by 2025.
annual capex of 1 billion is a good sign
HEIs spend with a clear mindset to support expansion and deliver growth 3 billion as capex during the last three years.
Despite Covid, it kept its focus on expansion by building a new power quality factory at Dodballapur in Bengaluru and a dry bushing facility for transformers at Maneja in Vadodara, Gujarat.
In addition, it expanded its feeder factories in the country which locally manufacture 80 per cent of the total global portfolio.
To meet the new demand, HEI is looking forward to expanding its traction transformation facilities in the country.
HEI estimated annual capex run rate 1 billion to meet the needs of the rapidly evolving energy scenario in the country.
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