MOSL: GE T&D INDIA (Neutral)- Operating performance above expectations

​GE T&D India:Operating performance above expectations

(GETD IN, Mkt Cap USD1.6b, CMP INR405, TP INR440, 9% Upside, Neutral)

• Performance aided by margin improvement: Sales grew by a muted 4% YoY to INR8.7b in 2QFY18, below our estimate of INR9.3b, impacted by deferment of sales on account of GST implementation. EBITDA stood at INR805m, higher than INR349m in 2QFY17 and our estimate of INR700m, led by closure of a large order (Champa Kurukshetra phase I) with a better margin profile. EBIDTA margin for the quarter stood at 9.3% (+510bp YoY). Adj. PAT stood at INR475m v/s INR205m in 2QFY17.
  
• EBIDTA margin expansion driven by execution of better-margin order cost and rationalization: EBIDTA stood at INR805m, as against profit of INR349m, with the margin expanding YoY to 9.3% from 4.2%, led by closure of a large order (Champa Kurukshetra phase I) with a better margin profile, and also cost-rationalization measures. Management guided for 7-8% EBIDTA margin on a sustainable basis, despite intense competition in the sector.
  
• Order inflow declines sharply: Order intake declined 42% YoY to INR7.3b in 2QFY18, impacted by a delay in finalization of orders on account of GST and also as 2QFY17 included finalization of a large order from Sterlite Grid and PGCIL. Order backlog stands at INR81b, providing revenue visibility for the next two years. Of the total order book, 40% is from PGCIL, 25% from private and the rest from the state. Key orders bagged in 2Q (all private orders) were (1) order from Doosan for Jawaharpur and Obra thermal power plant, (2) 50MW solar project from Marine electricals, (3) disconnector and earthing switches from ABB and (4) 145kv substation order from CPCL.