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MOSL: GE T&D INDIA (Neutral)-In-hand project execution on track, but orders visibility dim

GE T&D India: In-hand project execution on track, but orders visibility dim

(GETD IN, Mkt Cap USD1b, CMP INR274, TP INR280, 2% Upside, Neutral)

 

• performance above expectations: Sales declined 19% YoY to INR11.7b due to lower availability of HVDC orders for execution. Three of the four poles for the Champa Kurukshetra (CK) line are completed, and order backlog available for execution for the CK line stands at INR2b. EBITDA increased 55% YoY to INR1.1b (our estimate: INR1.0b), supported by a better revenue mix. Adj. PAT grew 1.8% YoY to INR531m, below our estimate of INR640m due to lower other income (INR97m v/s our estimate of INR300m) and a higher tax rate (40% v/s our estimate of 32%).
• Gross margin improves off a weak base: Gross margin improved 670bp YoY to 33%, given reduced execution of the CK order (INR838m v/s INR3,607m in 3QFY19) where margins were lower. EBIDTA margin improved 450bp YoY to 9.6%, supported by a better revenue mix.
• Order inflow healthy with equal contribution from private and govt. orders: Order intake increased 84% YoY to INR14.4b, given better order finalization from private and state/central utilities. Private constituted 50% of orders and the balance came from state and central utility orders. Ordering has been supported by the Saubhagya scheme-related state utility capex. Order backlog stands at INR64b, providing revenue visibility for the next 18 months. GETD expects ordering from state SEBs to remain strong; it is also targeting neighboring countries to grow the exports business.