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

​GE T&D India: Operating performance above expectations; Maintain Neutral

(GETD IN, Mkt Cap USD1.4b, CMP INR395, TP INR395, 0% Upside, Neutral)

• Performance aided by strong execution: Sales rose 41% YoY to INR12.1b in 1QFY18, meaningfully above our estimate of INR9.5b, led by strong execution of projects in hand. Adj. EBITDA stood at INR1.1b v/s INR21m (one-time tax provision of INR1.8b) in 1QFY17, with the margin expanding 850bp YoY to 8.7%. Adj. PAT stood at INR616m v/s INR360m in 1QFY17.
• EBIDTA margin expands led by better execution, cost rationalization: EBIDTA stood at INR1.1b as against profit of INR21m, with the margin expanding YoY to 8.7% from 0.2%. Operating margin expansion was driven by better operating leverage and cost control (employee cost rationalization). Management guided for 7-8% EBIDTA margin on a sustainable basis due to intense competition in the sector.
• Order inflow and book grow strongly: Order intake rose 98% YoY to INR15.8b in 1QFY18, driven by strong order finalization in the substation segment (46% of order inflow). Order backlog stands at INR84.2b, providing revenue visibility for the next two years. Of the total order book, 40% are from PGCIL, 40% from private and the rest from the state. Key orders bagged in 1Q were (1) 765/230kv GIS substation order from Doosan (INR4.0b), (2) 765kv AIS substation order at Warangal (INR3.3b), (3) Solar project from Odisha from PAN India Infra (INR1.6b) and (4) 765kv 80MVAR reactor order from PGCIL (INR662m).