Siemens Energy India, Hitachi Energy, GE Vernova T&D, BHEL: Sector overview

Siemens Energy India listing:The demerged business of Siemens Ltd, Siemens Energy India, has Hitachi Energy and GE Vernova T&D as close peers in the listed universe, with Siemens Energy India likely to emerge as India’s largest listed pure-play power T&D equipment player upon listing. Jefferies sees Siemens Energy India's market capitalistaion in north of $10 billion. Hitachi Energy and GE are valued at $6.8-9.6 billion.

Siemens Energy India supplies heavy-duty gas turbines of up to 600 MW, as well as large utility steam turbines and generators of up to 800 MW. In the power transmission business, it provides AIS and GIS, power transformers (up to 765 kV, 500 MVA), reactors (up to 765 kV), and traction transformers (up to 33 kV, 10 MVA), along with EPC solutions and services. The stock would list on BSE and NSE today.

HDFC Institutional Equities noted that Indian T&D investments have significantly picked up over the last two years, which has benefited sectoral incumbents. This has largely been driven by big renewable push and investment
in capacities for renewable power evacuation. 

It noted that India requires about Rs 1.2 lakh crore worth  HVDC equipment investment, of which only Rs 25,000 crore has been awarded until now and won by consortium of Hitachi-BHEL. 

"We have a pipeline of Rs 90,000 crore yet to be awarded. Siemens Energy India's total addressable market in this may be Rs 30,000 crore under the VSC-based (voltage source converter technology) HVDC technology as it doesn’t bid under LCC (line commutated converter) based HVDC technology, which is balance Rs 60,000 crore," HDFC Institutional Equities said.

Analysts noted with new demand drivers, increase in prices, and under-investment in global and local capacity, the base total addressable market has increased to Rs 30,000 crore per annum. 

"On top of this, HVDC may add Rs 20,000 crore annually for next five years, with exports of Rs 10,000 crore per annum, and with new drivers like data center, large private capex, battery storage, pump hydro, and grid automation, another Rs 10,000 crore/annum. This shall take the annual ordering to Rs 60,000-70,000 crore/annum against Rs 25,000 crore/annum pre-Covid or 2.5 times," HDFC Securities said.

These investments are coming at the high voltage end where globally the technology resides largely with top MNC players, viz., Hitachi Energy, Siemens Energy and GE Vernova, which creates a big entry barrier for competition, analysts said.

"Siemens is among the few players with a presence in high-voltage lines up to 765kV and is, hence, expected to benefit from planned investments. We believe that Siemens had adopted a selective stance for HVDC projects.
However, with the upcoming pipeline of HVDC projects, we expect the company to participate based on its technological capabilities. Additionally, state-wise ISTS strengthening initiatives are expected to drive investments worth Rs 12,000 crore in the sector," MOFSL said.

Jefferies said Siemens Energy India should see 40 per cent EPS CAGR in FY24-27E driven by the robust T&D pipeline and operating leverage.