NOT Dividends or Bonus... Multibagger Hitachi Energy Marks 75 Years in India with Rs 2,000 Crore Transformers Expansion

Hitachi Energy India, a leading player in the renewable energy segment, has been sizzling on Dalal Street with the stock gaining nearly 250% over the past one year.

In early trade on 7 October 2024, the stock price was down nearly 2% to Rs 13,738 and not too far from its 52-week high of Rs 14,848 that was reached on 30 September 2024.

The stock has also gained nearly 252% from its 52-week low of Rs 3,900 on 9 October 2023.

Other stocks in the renewable energy segment like Inox Wind has gained nearly 305% over the past one year, while Orient Green Power has appreciated 43% and Borosil Renewables has risen 7%.

Bangalore-based Hitachi Energy India helps customers to integrate huge volumes of renewable energy generated from sources like wind and solar energy to the existing electricity grid.

And the energy generated from renewable energy powers urban and rail transport and data centers, amongst others.

The company also offers a range of tech-based solutions to help reduce electricity consumption for a range of industries like cement and chemical plants.

The strong demand for renewable technology solutions comes at a time when India has ambitions plans to transform its energy requirements using renewable energy by 2030.

In addition, countries in Asia, Africa and Australia have also announced aggressive plan to increase the usage of renewable energy over the next 5-7 years.

Meanwhile, the central government is targeting reducing overall carbon emission in the country by 45% by the end of the decade and as part of that strategy plans are underway to ramp up off- shore wind energy capacity from 5 GW in 2022 to 30 GW in 2030.

Also, the above plan envisages setting up of 57 solar parks across the country, with a capacity of nearly 39.3 GW during this period.

How Hitachi is Getting Positioned

When companies reach significant milestones, such as completing 50 or 100 years, it's common for them to celebrate by rewarding their shareholders.

They often declare special dividends or issue bonus shares as a gesture of appreciation for long-term investor support.

Hitachi Energy is doing something different.

To leverage the growth opportunities in the energy transition sector over the medium term, Hitachi Energy India on Monday announced that it plans to invest Rs 2,000 crore over the next 4-5 years to further strengthen its operations in the country.

The announcement was made to mark 75 years of Hitachi Energy's presence in India.

Hitachi Energy India would include capacity expansion of the large power transformers factory, upgraded testing capabilities for specialty transformers at the small power transformers and the relocation of the bushings factory.

For the quarter ended June 2024, Hitachi Energy India reported income from operations of Rs 1,293.3 crore, a growth of 28.8% on a year-on-year basis.

The company reported a net profit of Rs 10.4 crore in the June 2024 quarter vis-a-vis a net profit of Rs 2.4 crore a year earlier.

The Bangalore-based company highlighted that its order intake amounted to Rs 2,436.7 crore during the June 2024 quarter, more than double from a year earlier.

The order book was led by contracts related to renewable energy from diverse industries in India and overseas.

In addition, the company received orders from distribution utilities for upgrade of digital solutions to provide better real time visibility and network management.

As a result, at the end of the first quarter the company's order backlog amounted to a record Rs 8,539.4 crore. The company is understood to implement its outstanding order backlog over the next few quarters.

Investors on Dalal Street

The growth outlook for Hitachi Energy India is certainly very bright, given the focus of governments across the globe on renewable energy. Hitachi Energy India trades at a P/E of more than 350 times FY24 earnings.

Meanwhile, Inox Wind had a consolidated net loss of Rs 52.9 crore for FY24, while

Borosil Renewables had a consolidated net loss of Rs 50.3 crore for FY24.

Here's a table comparing Hitachi Energy with its peers -

Comparative Analysis

Company	Hitachi	ABB India	CG Power	Suzlon	V-Guard Ind
ROE (%)	12.7	22.9	35.6	3.7	14.1
ROCE (%)	18.6	30.8	45.5	7.9	16.7
Latest EPS (Rs)	40.5	75.9	6.8	0.2	5.9
TTM PE (x)	345.5	104.5	105.2	475.4	74.4
TTM Price to book (x)	43.3	26.5	31.7	27.4	10.7
Dividend yield (%)	0	0.4	0.2	0	0.3
Industry PE	101.6
Industry PB	17.7

Data Source: Ace Equity, Equitymaster

As the Indian government rolls out its Rs 9.15 trillion power transmission investment plan, Hitachi Energy is poised to benefit from the increased demand for high-efficiency and sustainable transmission systems, particularly through HVDC technology and smart grid solutions.

For more details, see the Hitachi Energy company fact sheet and quarterly results.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...