Neutral Hitachi Energy Ltd for the Target Rs 36,000 by Motilal Oswal Financial Services Ltd

Hitachi Energy opened the fiscal year with a powerful performance, outpacing expectations on revenue, profitability, and order intake as India’s grid build-out and global electrification trends gather momentum. The company is benefitting from a deep order book, rising export demand, and early traction in battery energy storage systems—key pillars for integrating renewables at scale.

Quarter at a glance: strong beat on execution and margins

• Revenue surged 69% year-on-year to INR 24.9 billion, supported by timely execution across businesses.
• EBITDA rose to INR 4.2 billion, up 158% YoY, with margins expanding by 590 bps to 17.0%.
• PAT jumped 151% YoY to INR 3.5 billion.

The outperformance was underpinned by disciplined project delivery and operating leverage. While core transmission orders were softer in the quarter, diversified demand from data centers, industrial customers, and storage solutions filled the gap.

Order momentum: diversified growth beyond HVDC

Excluding high-voltage direct current (HVDC), fresh orders climbed 26% YoY to INR 51 billion, lifting the order book to INR 322 billion, up 11% YoY. Exports represented about 33.6% of orders, with traction across Europe, North America, and South Asia for grid integration and power quality equipment. This deepening export footprint signals competitiveness in the global clean-energy supply chain and adds resilience against domestic cyclicality.

BESS: early wins in the backbone of a renewable grid

Hitachi Energy secured its first integrated battery energy storage systems award—165 MW/330 MWh at Hebbatam, Andhra Pradesh. The company is focusing initially on India’s rapidly evolving storage market, where pairing renewables with firming capacity is becoming standard. Its offering provides the balance-of-system stack—power conversion, grid integration, automation, battery management software integration, digital monitoring, and end-to-end engineering—while customers source the batteries separately. The modular architecture is designed for both utility-scale and commercial and industrial deployments.

Margins in storage currently trail the company average due to early-stage scale and localization, but improving volumes and domestic manufacturing of components should close the gap over time. As India’s renewable tenders increasingly require storage, this segment is poised to be a structural growth vector.

Data centers: electrifying the digital economy

Data centers are emerging as a significant load center and a strategic market for grid-grade equipment. During the quarter, the company booked multiple data center orders, including a 42.5 MVA project in Hyderabad for a leading Indian multinational. Offerings span transformers, gas-insulated switchgear, substations, grid integration, services, and digital solutions. A modular “grid-to-rack” concept under development aims to standardize and accelerate deployments for hyperscale customers.

With developers locking in long-lead electrical gear earlier in project cycles—and India’s data center capacity set for multi-year expansion—this vertical should remain a material contributor to orders outside of HVDC.

Outlook: steady HVDC pipeline, improving mix, disciplined stance on valuation

• Assumptions incorporate approximately one HVDC order per year over the next several years.
• Projected order inflows: INR 207 billion (FY27), INR 234 billion (FY28), and INR 258 billion (FY29).
• Estimate upgrades reflect stronger execution and margin outlook: +11% for FY27 and +3% for FY28.
• Expected CAGR (FY26–FY29): Revenue 31%, EBITDA 42%, PAT 39%.

On current pricing, the stock implies multiples of roughly 90x/66x/51x for FY27/FY28/FY29. These valuations already discount consistent large-scale HVDC success and robust execution. The stance remains Neutral, with a target price of INR 36,000 based on 60x Dec’28E, and a preference for more attractive entry points before turning more constructive.

What to watch

• HVDC execution scale-up and the cadence of new wins.
• Export order momentum in grid integration and power quality solutions.
• Localization and margin progression in BESS as deliveries ramp.
• Data center capex trends, power densities, and standardization of electrical packages.
• Policy support for renewables-plus-storage and grid modernization in India.

Bottom line: Hitachi Energy is riding powerful structural themes—renewables integration, data center electrification, and grid digitalization. The growth runway is long, but with elevated valuations embedding a rich HVDC pipeline, disciplined investors may prefer to await better risk-reward before adding exposure.