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Key beneficiaries of tailwinds in the power transmission sector:

ICICIdirect Research 20 Dec 2024 DISCLAIMER

PowerGrid Corporation, which transmits 45% of India’s power, having a strike rate of 62% in project wins is at the right spot to ride the tailwinds in the power transmission sector. The company expects a capex of ₹ 25-30000 crore for FY26E which will further scaled upto ₹ 35-40000 crore from FY27E onwards thereby ensuring strong earnings profile. The CWIP has grown 40% in H1FY25 over FY24 to ₹25391 crore. Company won projects costing >₹50000 crore (₹7200 crore Tariff) so far in FY25 and has works at hand of ₹1.43 trn.

KEC International an EPC major in the power Transmission and Distribution space is set to grow in the range of 30-40% in the domestic T&D space. The company has ~₹23000 crore order book in the T&D and has ~₹60,000 order bid pipeline. The growth in T&D business is contributing to improvement in margins and will drive them upward to 9.1% in FY27E. It has recently raised ₹870 crore equity via QIP and repaid ₹1000 crore debt. It is aiming to improve working capital days to 100.

Kalpataru Projects International Ltd. The company, is amongst leaders in Power T&D EPC space and has of ~ ₹22,269 crore T&D order book. The T&D order book and pipeline is delivering 25% topline growth YoY. The company is winning orders at double digit margin which will positively impact the margins from H2FY25E onwards, (EBITDA 8.5-9% and PBT 4.5-5% guidance). To improve its return ratios company is focusing on divesting non-core assets and has recently divested Vidhyanchal Expressway, it has also raised ₹1000 crore equity via QIP and plans to use the funds for Capex in T&D business, better management of working capital and explore opportunity of inorganic growth in manufacturing space. The improvement in working capital will help the company to increase ROE’s from 10.3% in FY24 to 13.1%/15.5% in FY25E/FY26E.

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