Schneider Electric Infrastructure (SEIL) stock is among those few that have defied the market trend this year and clocked strong double-digit gains.
Year-to-date, the stock is up 77% while the Sensex is down about half a percent (as of October 4 close).
Strong gains in the stock seem to have attracted brokerage firms. Brokerage LKP Securities has initiated coverage on the stock with a buy call, setting the target price at ₹236.
LKP is positive on the company which deals in manufacturing, designing, building and servicing technologically advanced products and systems for electricity distribution including products such as distribution transformers, medium voltage switchgear, medium voltage projection relays and electricity distribution and automation equipment.
SEIL also specializes in providing solutions for smart grids. SEIL’s solutions are used by electrical distribution (utilities) and power generation companies along with the electro-intensive industry, said LKP.
"SEIL is poised to perform well ahead given (1) Government of India (GOI) power sector reforms along with initiatives like grid modernization and investments in sustainable energy (renewables). (2) Company’s strong presence in infrastructure, power, building, industry and IT segments, coupled with its ability to offer services cutting across these segments provides a distinctive advantage to serve its customers, further supported by strong parental support to help SEIL leverage its experience. (3) Strong order book provides healthy revenue visibility going forward," said LKP Securities.
"GOI power sector reforms along with initiatives like grid modernization, investments in sustainable energy and Make in India to result in favourable business environment for SEIL," said LKP.
Overall, the outlook remains positive for the segments that drive the growth of the company, said LKP.
The power sector in India continues to remain one of the government’s primary focus areas, as an increasing number of reforms involving digitalisation are expected to be implemented in the next few years.
In the long term, reform is also expected to take place at the distribution level, including privatisation and a shift toward renewables, to which India has committed itself to an ambitious target, said LKP.
In the transportation sector, the development of the metro lines across India, the modernisation of the railways, and the focus on building more and better airports indicate that these are up for expansion in the near future.
Oil and gas are also expected to undergo a period of transition as the case for renewables becomes undeniably stronger.
"The company’s performance for FY22 and Q1FY23 was strong wherein execution has remained strong after a long hiatus reaching ₹15,000 million in one year for the first time while PAT turned black after 10 years. The company strategy remains aligned to prioritise cash and margins. The company remains cautiously optimistic in the short to mid-term with support from the government in the form of investment, reforms and policies," said the brokerage firm.
Disclaimer: This article is based on a report by LKP Securities. Some minor editing has been done. The views and recommendations given in this article are those of the broking firm. These do not represent the views of MintGenie.