Nomura initiated coverage on CG Power Industrial Solutions Ltd., GE Vernova T&D India Ltd., and Apar Industries Ltd. with a 'Buy' rating. The Tokyo–headquartered financial services firm believes that India's power transmission sector is poised for significant growth because of growing electricity demand and ambitious renewable energy targets.
Nomura has Rs 970 target price for CG Power Industrial Solutions, which implied 33.72% upside from Wednesday's closing price. The company is well poised to benefit from industry tailwinds. Transition towards energy–efficient motors in industrial system, rising demand for power equipment in the backdrop of renewable energy penetration, and inorganic acquisition will drive growth for the company, it said.
The target price for GE Vernova T&D India is set at Rs 2,500, which implied 43.6% upside. This company is likely to take advantage of the structural tailwinds present in the transmission and distribution industry, according to Nomura.
GE Vernova T&D India's backlog, revenue and net profit will record CAGRs of 47%, 32%, and 76%, respectively over the period between financial year 2024 and 2027, Nomura said in the note.
Apar Industries is likely to deliver revenue at CAGR of 17% over FY24 and FY27, Nomura said. Robust domestic demand in the conductor business, growing export market for conventional conductors with a better premium are going to drive the top line growth, Nomura said in a note.
Meanwhile, shares of Apar Industries Ltd., GE Vernova T&D India Ltd., and CG Power and Industrial Solutions Ltd. did not react much on Thursday due to overall declining trend across Indian markets. The shares of the companies were trading with marginal gains as of 1:07 p.m.
Nomura believes that the global electricity consumption will grow significantly faster in the coming decade. The electricity consumption growth is important to restrict average temperature rise to within 1.5℃.
To meet the goal of net zero, grid infrastructure poses the most important challenge, Nomura said. Despite the importance, the investment in the grid infrastructure remained largely stagnant. The issue is particularly prominent in the developing countries.
"Over 3,000 gigawatts of renewable energy projects are awaiting grid connections," Nomura said, citing Hitachi India's report.
By 2040, 80 million kilometres of new or refurbished grid infrastructure will need to be added worldwide, Nomura cites International Energy Agency.
India's power demand is likely to grow at a CAGR of more than 7% over the period financial year 2024 and 2027. The renewable energy's share in India's power mix continues to grow with solar and wind power meeting 75% of India's incremental power demand, Nomura said.
The share of renewable energy will grow from here on. It will account for 55% of the total power capacity, Nomura cited Ministry of Power's estimates.
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