37% upside? Hitachi Energy India shares hit 10% upper circuit limit on strong Q2 results

Hitachi Energy India Ltd saw its shares rallying 10 per cent in Tuesday's trade after the company reported better-than-expected September quarter results. Hitachi Energy (Hitachi) reported strong beat on profit. It reported an 18 per cent growth in sales, 400 basis points improvement in year-on-year (YoY) gross margin and 930 bps expansion in Ebitda margin YoY. 

Order inflow for Q2 stood at roughly Rs 2,200 crore, up 13 per cent YoY; with the orderbook standing at Rs 29,400 crore, up 230 per cent YoY. 

ICICI Securities said Hitachi Energy India is in early stages of executing its burgeoning order book due to which it is expecting revenue, Ebitda and profit CAGRs of 42 per cent, 61 per cent and 68 per cent, respectively, over FY25-28E. 

"After a muted H1FY26, we expect ordering to improve in H2 as we estimate equipment orders to be placed for orders finalised in FY25. Moreover, we estimate HVDC projects worth INR 0.8trn to be awarded in next 12-18 months (equipment opportunity of Rs 40,000 crore) and HVDC equipment opportunity worth Rs 1.8 lakh crore in medium term. Hitachi is the key beneficiary of rise in transmission capex," it said. 

The brokerage maintained its 'Buy' rating with an unchanged target price of Rs 24,500 (37 per cent upside potential), factoring in robust ordering pipeline, capex plan and sustained margin improvement.

Following its Q2 results, shares of Hitachi Energy India Ltd were locked at their upper circuit limit at Rs 19,730.40 apiece on BSE.

ICICI Securities noted that India is upgrading its grid for evacuation of 900GW (vs 480GW now). The nation is also targeting 43 per cent of electricity consumption by renewables by 2030 against 23 per cent now. As a result, transmission capex is expected to pick up after FY20–24’s subdued investment cycle. 

It estimated Rs 3.4 lakh crore of capex for inter-state transmission in next 4–5 years. Out of which, the need for HV equipment is on the rise. 

"With rising complexity of the grid due to a potential influx of renewables, unique challenges in stability shall emerge. To ensure a stable grid, we see the need for specialised equipment like statcoms, reactors etc. With Hitachi Energy being at the forefront of this transition, we believe the company could see maximum benefit in India’s pursuit of grid strengthening.

Railway electrification is another big opportunity. Indian Railways is looking to electrify and upgrade its network to increase the speed of trains. Hitachi Energy, with its Scott transformers, trackside and traction transformers, appears ready to tap into this opportunity, ICICI Securities said.