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Research
India Power Transmission - Growth drivers in place: AnandRathi Institutional Research
Posted On : 2015-10-08 20:32:31( TIMEZONE : IST )
Our analysis of the power T&D segment reveals a global opportunity of $1trn. In addition, given the inadequate transmission capacities in India, policy-makers are focusing on improving them. As most T&D companies we cover obtain ~50% revenue from exports, these two areas open up opportunities for those such as Techno Electric, KEC International, Kalpataru Power and Skipper.
Global and Indian opportunities ~$1trn. The global T&D sector is likely to attract investment of $1trn over the next 5-6 years. In India, to bridge the gap between generation capacity and transmission infrastructur, we estimate planned investment of $75bn in the next 5-7 years. We expect Rs. 1trn of transmission projects to come up for bidding in the next 12-18 months. In addition, the green energy corridor (Rs. 430bn), feeder separa tion (Rs. 1trn) and smart cities will be demand drivers.
Indian T&D operators ready to grab opportunities. Indian T&D operators such as KEC, Kalpataru, L&T, Skipper, etc, have established themselves in developing markets, which will see 70% of global investment in T&D. KEC, Kalpataru and Skipper have ~50% of their order books from fast-growing regions. KEC and Kalpataru are also among the top-10 PGCIL contract awardees. These companies are well-placed to grab the above-men tioned opportunities.
T&D investment a government priority. Power-evacuation constraints and high T&D losses have attracted the attention of policy-makers for more investment in transmission infrastructure to match the investment in power generation. However, there are some challenges ahead, most important being the poor health of the State Electricity Boards (SEBs). The inability of the state-owned distribution utilities to be financially and co mmercially viable is putting at risk the significant investments being pumped into the electricity sector by private and public players.
Valuation We initiate coverage on Kalpataru Power (Buy, TP Rs 300), KEC International (Buy, Rs 193), Techno Electric (Buy, TP Rs 620), Skipper (Buy, Rs 204) and Genus (Buy, Rs 50).
