GE Vernova T&D India backlog supports growth despite delayed export order conversion

Investment View and Target Price

Motilal Oswal Financial Services Limited (MOFSL) maintained its Buy rating on GE Vernova T&D India despite weak first-quarter FY27 order inflows. The broker considers the weakness temporary, citing delayed conversion of export opportunities and an improving domestic transmission tender pipeline.

MOFSL reduced its target price to Rs 5,100 from Rs 5,200 after lowering its FY27 and FY28 estimates. It expects the company’s sizeable order backlog, domestic transmission opportunity and future high-voltage direct current (HVDC) projects to support growth.

1QFY27 Financial Performance

Better execution and higher other income supported profit. However, gross margin and EBITDA margin were below MOFSL’s expectations, primarily owing to higher-than-expected cost of goods sold.

Order Inflows and Backlog

Order inflow fell 30% year on year to Rs 11.4 billion in 1QFY27. In contrast, the closing order book stood at about Rs 208 billion as of June 2026, up 60% year on year. Export orders accounted for 46% of quarterly bookings.

Key wins during the quarter included current transformer and capacitive voltage transformer orders from GE Vernova North America, 400 kilovolt gas-insulated switchgear orders for Spain and Morocco, a 155 MVA 245 kilovolt transformer for a semiconductor customer, and grid automation packages for state utilities, engineering procurement and construction contractors, and data centres.

Domestic and Export Ordering Outlook

Management said a previously approved Rs 1,300 crore US data-centre export opportunity has been delayed to 2QFY27 or 3QFY27 because a change in project location required a revised voltage configuration. A separate Rs 3,000 crore export project has been put on hold by the customer due to budget issues and will require fresh shareholder approval if revived.

Management expects domestic ordering to improve from 2QFY27 or 3QFY27 as the transmission-based competitive bidding (TBCB) pipeline has strengthened. However, longer Powergrid approval timelines could extend the pace of order finalisation. The company remains confident of achieving its annual base-order target of Rs 7,000 crore to Rs 8,000 crore.

HVDC Pipeline and Competitive Positioning

Management described the HVDC pipeline as intact despite slower conversion. Lakadia is on hold, Begunia has shifted to an extra-high-voltage alternating-current (EHVAC) configuration and South Kallam remains unawarded. Developer selection for key projects is expected in August or September 2026, while one or two additional projects may enter bidding.

MOFSL expects meaningful HVDC revenue contribution only from FY29, with the existing backlog supporting growth in FY27 and FY28. The broker expects Chinese gas-insulated switchgear suppliers to face constraints from 60–70% domestic value-addition requirements and tight delivery schedules. Competition from Tier-2 domestic suppliers is stronger in conventional products such as circuit breakers than in GIS, automation and software.

Margins, Cash Position and Capital Allocation

Management attributed the roughly 400-basis-point gross-margin decline versus FY26 to lower export mix and the completion of profitable export projects, higher commodity prices, and greater high-voltage business execution. High-voltage business has structurally lower gross margins but offers better operating leverage.

Management retained its full-year EBITDA-margin guidance in the mid-20s percentage range. The company generated Rs 4.2 billion of cash during the quarter and had Rs 29.3 billion of available cash, including the group cash pool.

About Rs 13 billion has been earmarked, including Rs 10 billion for capacity expansion and about Rs 2.5 billion for a proposed second-quarter dividend, subject to shareholder approval.

Forecasts and Valuation

MOFSL expects base ordering to grow at a 13% compound annual rate over FY26–FY29, supplemented by HVDC wins every alternate year. It forecasts revenue, EBITDA and profit after tax compound annual growth of 26%, 24% and 24%, respectively, over FY26–FY29, with EBITDA margins around 27%.

The broker reduced FY27 and FY28 earnings estimates by about 4% and 5%, respectively, to reflect first-quarter performance. The Rs 5,100 target price is based on the average of discounted cash flow valuation and 58 times December 2028 estimated earnings per share.

Key Risks

• Lower-than-expected base-order growth.
• Margin pressure from product mix, commodity prices and execution factors.
• Greater competition, particularly in conventional products such as circuit breakers.
• Delays in the HVDC execution ramp-up and project awards.