TD Power Systems export-led order surge strengthens FY27 earnings visibility

Investment View and Target Price

In its August 12, 2026 result update, Anand Rathi Research upgraded TD Power Systems (TDPS) to BUY after a strong Q1 FY27 that improved its confidence in the company’s execution ability and earnings visibility. The broker believes the global power-equipment upcycle is translating into near-term orders, revenue and profit rather than remaining a distant opportunity.

Anand Rathi raised its DCF-based target price to Rs1,751 from Rs1,324, supported by stronger expected cash flows, higher estimates and a one-year roll-forward in valuation. At the report CMP of Rs1,478, this implies 18.5 per cent DCF upside.

Strong Q1 FY27 Financial Performance

TD Power Systems reported consolidated Q1 FY27 revenue of Rs6,400.5 million, up 72.1 per cent year on year and ahead of Anand Rathi’s Rs4,780 million estimate. The company executed 320 generators during the quarter, while price increases also aided revenue.

EBITDA margin expanded despite gross margin being broadly flat year on year. Reported PAT increased 72.3 per cent year on year to Rs862.9 million, compared with the broker’s Rs650 million estimate.

Order Inflows and Export-Led Visibility

Order inflows grew 87 per cent year on year to Rs7,340 million, led by 165 per cent export growth. Closing order backlog rose 50 per cent year on year to Rs22,070 million.

Exports, including deemed exports, comprised 69.5 per cent of the Q1 FY27 order book, versus 43.4 per cent in Q1 FY26. Anand Rathi views the export-heavy order book and repeat global OEM demand as important sources of FY27 execution visibility.

Demand Outlook and Capacity Expansion

Management said demand remains robust across gas engines and turbines, steam turbines, hydro, geothermal, waste-to-energy, grid balancing and AI data-centre-linked power generation. It attributed demand strength to a global shortage of power-generation equipment, firm OEM schedules and customer advances.

• FY27 revenue guidance was raised to Rs26,000 million from Rs24,000 million.
• FY27 order inflows are expected to exceed Rs28,000 million, led by exports.
• EBITDA margin guidance was retained at 18-19 per cent.
• FY27 capital expenditure of about Rs500 million is intended to create annual revenue capacity of around Rs32,000 million for FY28.

Management clarified that the Rs32,000 million figure is a capacity indication rather than FY28 revenue guidance. TDPS is evaluating additional expansion to exceed Rs40,000 million of revenue by FY29 or FY30.

New Product and End-Market Opportunities

The company is evaluating an entry into generators above 100MW. Management included no revenue from this programme in FY27 guidance because the manufacturing cycle is 18-20 months. Hydro refurbishment offers near-term order optionality. Railway capacity is expected to be redeployed to generators and motors once the existing railway backlog is completed.

Earnings Estimates and Operating Outlook

Anand Rathi increased its FY27E revenue estimate by 9.7 per cent to Rs25,799 million, EBITDA by 10.9 per cent to Rs5,142 million and PAT by 11.4 per cent to Rs3,702 million. FY28E revenue and PAT estimates remain broadly unchanged at Rs30,773 million and Rs4,595 million, respectively.

The broker forecasts revenue and PAT compound annual growth rates of 28.8 per cent and 38.7 per cent, respectively, over FY26-FY28E. Return on equity and return on capital employed are expected to improve to 28.3 per cent and 37.4 per cent by FY28E.

Valuation Framework

The target price is based on discounted cash flow valuation, using an 11.0 per cent weighted average cost of capital. FY28 is the first discounted year, and the enterprise-to-equity bridge uses consolidated FY27 closing cash and debt. The broker assigns no separate option value to the above-100MW generator opportunity.

Anand Rathi acknowledges demanding valuation, with the stock trading at 62.3 times FY27E earnings per share and 50.2 times FY28E earnings per share at the report CMP. Despite this, it sees 18.5 per cent DCF upside.

Key Risks

• Commodity-price volatility.
• Execution delays.
• Working-capital stretch.
• Delays in large-generator capital expenditure.