Shares of power firm Genus Power Infrastructure have given extraordinary returns to its investors since COVID lows, rising nearly 7 times. The stock soared from ₹12.5 in March 2020 to currently trade around ₹87, surging as much as 594 percent.
Brokerage house ICICI Securities believes there is more steam left in the stock. The brokerage has a ‘buy’ call on the stock with a target price of ₹121, implying a potential upside of nearly 40 percent. This is on the back of a strong rise in its order book in the December quarter, margin improvement and a robust outlook. The brokerage expects margin improvement to continue as commodity costs ease further and semiconductor supply chains normalise.
However, in the last 1 year, the stock has shed 7 percent. It's down 7 percent in February so far after a 10 percent jump in January.
In the December quarter (Q3FY23), the company posted a net profit of ₹22 crore, up 47 percent from its net profit of ₹15 crore in the year-ago period. Its total income also rose 7 percent to ₹221 crore from ₹206 crore in the same quarter last year.
The brokerage noted that Genus Power Infrastructures’ (GPIL) Q3FY23 EBITDA margin improved to 10.2 percent (from 7.7 percent in Q2FY23) on the back of commodity price moderation leading to improved gross margin. PAT also rose 14 percent QoQ supported by higher other income.
GPIL received LoA worth ₹2,420 crore (net of taxes) from the state of Assam for the implementation of advanced metering infrastructure (AMI) for installation and operations of 2.949 mn smart meters in Jan’23, informed the brokerage.
The order takes the book to ₹4,099 crore (net of taxes) from ₹1,680 crore at Q3FY23-end, up over 144 percent, and provides good visibility for higher order execution in the near-to-medium term, highlighted the brokerage.
It further pointed out that the management expects semiconductor supplies to normalise in FY24 and commodity prices to ease further, leading to an increase in order execution as well as improvement in margins going forward.
"We maintain our BUY rating on GPIL. We roll forward our valuations to FY25E earnings, assigning a 17x multiple (its 10-year historical average), as against 20x on FY24E earlier, revising our target price to Rs121 (earlier: ₹107). At CMP of ₹89/share, the stock is trading at 12.5x P/E and 8.6x EV/EBITDA on FY25E basis," said the brokerage.
Key risks are: 1) Slower-than-anticipated pick-up in tendering activities, 2) continued shortage of semiconductors and other electronic components, and 3) a significant increase in commodity prices, added ICICI.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
