Motilal Oswal Initiates Coverage on T&D Stocks; Recommends 'Buy' on CG Power, GE Vernova T&D, and Siemens Energy Amid Capex Boom

Motilal Oswal Initiates Coverage on Select T&D Stocks

In its latest report, domestic brokerage firm Motilal Oswal has initiated coverage on select transmission and distribution (T&D) stocks, citing expanding capital expenditure, growing order books, and an increasing share of high-voltage direct current (HVDC) projects. The brokerage highlighted a sharp increase in transformer demand in international markets, driven by renewable energy integration, data centre expansion, industrial electrification, electric vehicle (EV) charging infrastructure, and the urgent need to replace ageing infrastructure.

Rising Demand and Imports Drive Transformer Prices

Apart from rising domestic demand, the brokerage noted that the sharp increase in transformer demand in international markets has led to increased reliance on imports and higher transformer prices. Domestic manufacturers are expected to capitalise on the opportunity, driven by the urgent need to replace ageing infrastructure and rising demand from renewable energy integration, data centre expansion, industrial electrification, and EV charging infrastructure.

Identified Companies for Strong Earnings Growth

Against this backdrop, the brokerage has identified companies that are benefiting from incremental capex, revenue growth, and margin improvement and expects them to continue delivering strong earnings growth over FY25–28. The identified companies include CG Power, Atlanta Electricals, GE Vernova T&D India, and Siemens Energy. The brokerage has assigned a ‘Buy’ rating to these companies, with price targets of ₹900, ₹650, ₹4,750, and ₹3,700 per share, respectively.

Valuations and Export Opportunities

While the stocks are trading at rich valuations, the brokerage noted that the possibility of further earnings upgrades and the emergence of export opportunities could help sustain these valuations. The brokerage has also upgraded Hitachi Energy to 'Neutral' and reiterated its ‘Buy’ rating on Siemens Energy.

T&D Value Chain Growth

The transmission and distribution (T&D) value chain, particularly segments focused on high-voltage transformers, continues to benefit from a robust capex pipeline extending to 2032, alongside a significantly stronger opportunity emerging from global markets for quality players. India’s National Electricity Plan has outlined an ambitious investment of ₹9 trillion in transmission, leading to a structural acceleration in order inflows in recent years, driven by large-scale renewable energy integration.

Capacity Expansions and Export Markets

With most players announcing capacity expansions, the industry is positioning itself to cater to sustained demand from both domestic and export markets. The demand is strong enough to absorb the increased capacity without exerting downward pressure on prices in the near term. The brokerage also underscored that transformer manufacturers in India are benefiting from the rising share of HVDC projects, which require specialised, high-value converter transformers and reactors.

HVDC Projects and Pipeline

The brokerage expects the sector to witness one to two HVDC project awards annually going forward. Of the 32.3 GW HVDC pipeline outlined in the NEP, around 14.5 GW has already been tendered and awarded. The participating companies include Hitachi Energy India, Siemens Energy India, GE Vernova T&D India, and BHEL.

Comparison of HVDC Pipeline and Tendered Projects

| Company | HVDC Pipeline (GW) | Tendered and Awarded (GW) | | --- | --- | --- | | Hitachi Energy India | | | | Siemens Energy India | | | | GE Vernova T&D India | | | | BHEL | | | | Total | 32.3 | 14.5 |