InCred Equities has initiated coverage of Techno Electric and Engineering Company with a ‘Buy’ rating, citing its strong positioning as a leading EPC player in India’s power transmission and distribution sector with over 45 years of experience and a proven track record across major projects, including NTPC and Power Grid. The brokerage highlighted the company’s expansion into TBCB (tariff-based competitive bidding) projects, smart metering with an order book exceeding ₹2,600 crore, and entry into the data centre space with a planned $1 billion investment to build 250 MW capacity by FY30.
It noted that the company has a robust order book of over ₹9,500 crore (book-to-bill of 3x), providing strong growth visibility, with revenue and Ebitda expected to grow at a 32 per cent CAGR and profit after tax (PAT) at 19 per cent CAGR over FY25–28E.
Valuing the company on a sum-of-the-parts (SOTP) basis, InCred has set a target price of ₹1,681, implying a 34 per cent upside, driven by growth in the EPC business and increasing contribution from the high-margin data centre segment, despite some moderation in PAT due to higher depreciation.
Around 01:20 PM, shares of Techno Electric were trading at ₹1,265, up 1.20 per cent from the previous session's close of ₹1,250. The stock touched an intraday high of ₹1,268.15 on the NSE. In comparison, the benchmark NSE Nifty50 was quoting at 24,256.15 levels, down by 122 points or 0.5 per cent.
Here's why InCred Equities is bullish on Techno Electric:
Proven T&D EPC leadership
According to InCred Equities, the company has over 45 years of experience in the T&D space and is an established EPC player with more than 50 per cent share in PGCIL’s substation portfolio, positioning it to benefit directly from increased capex by PGCIL. It also has a strong client base of marquee PSUs and state utilities, with the segment remaining a consistent cash generator supported by superior margins.
Dual growth drivers in T&D and data centres
Analysts believe the company is well placed to benefit from a ₹9.15 trillion T&D capex opportunity over 2023–32, with substation capacity expected to grow at 6.7 per cent CAGR, supported by policy initiatives under National Electricity Plan (NEP) Volume II. Additionally, data centre capacity is projected to expand at 35-40 per cent CAGR (from 1.5 GW to 8 GW over FY25–30), driven by cost advantages, policy support, and a demand–supply gap, with incremental capacity also boosting T&D demand.
Strong earnings visibility over FY25–28E
According to the brokerage, Techno Electric's revenue, Ebitda, and PAT are expected to grow at CAGRs of 32 per cent, 32 per cent, and 19 per cent, respectively, driven by around 25 per cent CAGR in the EPC segment. High-margin data centre revenues are projected to contribute about 3-4 per cent by FY27E–FY28E, though higher depreciation may moderate PAT growth, the brokerage said.
Strong balance sheet and fast-growing data centre business
InCred said the company has maintained a debt-free balance sheet for the past five years, with around ₹2,800 crore in liquid investments to support capex, along with potential capital from AMI monetisation and strong operating cash flow conversion of over 70 per cent. Additionally, the data centre business is expected to scale rapidly, with 90 per cent CAGR in capacity over FY26–28E, utilisation reaching 58 per cent by FY28E, and a 30:70 mix between add-on services and colocation.
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(Disclaimer: Views and outlook shared belong to the brokerage/analysts and are not endorsed by Business Standard. Readers' discretion is advised.)