Techno Electric surges 9% on healthy growth outlook

Shares of Techno Electric Engineering Company (TEEC) moved higher by 9 per cent to Rs 345 on the BSE in Friday’s intra-day trade on healthy growth outlook. In past one year, the stock of civil construction company has rallied 45 per cent, as compared to 8 per cent rise in the S&P BSE Sensex. It had hit a record high of Rs 391 on February 10, 2023.

TEEC is among the leading power-infrastructure companies engaged in three primary business segments; EPC (construction), renewable power generation (wind power) and public-private partnership (PPP) projects in transmission & distribution (T&D).

On February 8, the company sold its 37.5 MW wind power assets for Rs 158.93 crore, and entered into MOUs for the sale of another 71.40 MW. The move is in line with the company’s strategy to exit from non-core businesses and keep focusing on expanding their international presence and becoming a significant EPC player.

With the continuing momentum in divestment of long-term assets and non-core businesses, TEEC remains focused on executing its strategy of pursuing growth in targeted core EPC businesses, the management had said.

Meanwhile, the company’s current order book is at Rs 4,000 crore and for FY24, the management indicated Rs 5,000 crore order bids pipeline and expects order momentum to continue across flue gas desulfurization (FGD), T&D and smart metering. The company expects to bag another Rs 1,000 crore order in Q4YF23E that gives medium term revenue visibility.

The management expects growth momentum of business as well as execution to continue for the coming three years. “At least for the year ’24, ’25 and ’26, we expect larger business at present out of FGD segment, AMI segment and datacentres and status quo in our transmission and distribution business. The power sector reforms are strongly pursued by government and additionally the Electricity Act pending for last three, four years, has been approved as of the December end ’22,” P. P. Gupta, Managing Director of TEEC said in Q3FY23 earnings call.

According to ICICI Securities, the company’s entry into data centre, smart meters and FGD market and becoming significant EPC player that improves revenue visibility over the next few years. The company has healthy balance sheet and cash balance of Rs 1200 crore.

The brokerage firm expect revenue, EBITDA to grow at CAGR of ~39.8 per cent, 13.1 per cent, respectively, in FY23-25E, and value TEEC at Rs 500 i.e. 19x PE on FY25E.