Hitachi Energy Q1 beat backed by backlog execution, BESS and data-centre orders

Investment View and Valuation

Motilal Oswal's August 7, 2026 result update on Hitachi Energy highlights a strong Q1 FY27 performance, but retains a Neutral rating because the prevailing valuation already reflects the expectation of large HVDC order wins every year. The broker raised its target price to Rs 36,000 from Rs 32,000, based on 60 times December 2028 estimated earnings, compared with the earlier valuation based on 60 times September 2028 estimated earnings.

Motilal Oswal would await better entry points despite the improving operating outlook.

Strong Q1 FY27 Operating Performance

Hitachi Energy reported a material beat against Motilal Oswal's Q1 FY27 expectations, supported by timely execution of the order backlog across businesses.

Order Inflows and Backlog Visibility

Excluding HVDC, Q1 FY27 order inflows increased 26 per cent year-on-year and 39 per cent quarter-on-quarter to Rs 5,100 crore. The order book reached Rs 32,220 crore, up 11 per cent year-on-year, providing revenue visibility.

Transmission order inflows were weak during the quarter because of project timing. However, the broker expects improvement as the Central Electricity Authority's tender approval process accelerates. Exports accounted for about 25 per cent of revenue and order backlog, and about 34 per cent of Q1 order inflows.

Key wins included an approximately Rs 1,700 crore order for Europe's 2 GW wind-power evacuation programme, GIS and GIB packages for a 100 GW solar park in western India, and multiple data-centre projects involving more than 560 MVA power transformers, 800 MVA dry transformers and 230/33 kV GIS.

Medium-Term Growth Pipeline

Management indicated that the medium-term pipeline is healthy across transmission, HVDC, railways and metros. Delayed railway and metro orders are expected to recover in the second half of FY27. At least one major greenfield HVDC project was under bidding and was expected to be awarded within about six months.

Management noted that HVDC revenue is typically limited in the first year of execution and accelerates in the second and third years. Current execution is therefore largely driven by the base business, although ongoing execution of the 1,000 MW Kurnool-Raichur HVDC project should support future growth.

BESS and Data-Centre Opportunities

Battery Energy Storage Systems

Hitachi Energy won its maiden 165 MW/330 MWh BESS project at Hebbatam, Andhra Pradesh. Its balance-of-system offering includes power conversion systems, grid integration, automation, battery-management software integration, digital monitoring and engineering, while customers procure the batteries separately.

The broker notes that BESS margins are currently below the portfolio average because the business is at an early stage. It expects gradual improvement as volumes and localisation increase.

Data-Centre Demand

Data-centre demand is favourable. The company won a 42.5 MVA Hyderabad project and is developing a modular Grid-to-Rack platform integrating electrical equipment, services and digital solutions. Earlier ordering of long-lead equipment by hyperscale developers improves visibility.

Estimates and Margin Outlook

Motilal Oswal raised its FY27 and FY28 estimates by 11 per cent and 3 per cent respectively, citing better execution and higher margin expectations. It forecasts FY26 to FY29E revenue, EBITDA and PAT compound annual growth of 31 per cent, 42 per cent and 39 per cent respectively.

Key Drivers and Constraints

The key support for the thesis is strong backlog conversion, annual HVDC wins, improving exports, lower fees to parent entities and operating leverage.

The principal constraints are the rich valuation, the assumption of at least one HVDC win each year, weak near-term transmission ordering, project-award timing and currently lower BESS margins.