GE Vernova T&D stock is outpacing rivals: What's driving this high-voltage run?

In a recent interaction with Emkay Global Financial Services, the company management said the domestic market is seeing some softness in order inflow, but it is likely to pick up from the current quarter ending December, given the strong pipeline, said analysts at Emkay. GE Vernova said it estimates domestic ‘market opportunity’ of ₹2.7 trillion over FY25-30, excluding HVDC (high voltage direct current) projects, implying about ₹45,000 crore of potential orders annually.

The management told Emkay that two HVDC orders (Khavda-South Olpad project and the Barmer-South Kalamb project) are expected to be finalized and awarded to original equipment manufacturers (OEMs) within the current financial year. While HVDC also has a large market opportunity, these projects face significant delays in getting awarded because of technological complexity.

A bigger push for the company would come from strong order inflows from its parent entity GE Vernova Inc., which is also seeing a revival with commissioning of large renewable energy projects globally. The management foresees robust global market opportunities, expected to nearly double to $175 billion from $80 billion in 2023. The board of its parent firm has approved outsourcing orders worth ₹3,000 crore to the Indian entity in FY26 so far, as against ₹2,000 crore in FY25.

In this backdrop, Nomura Global Market Research has raised its order inflow estimates for the firm to ₹44,400 crore over FY25-28 from ₹34,700 crore projected earlier, factoring in large export orders. Increasing focus on exports also augurs well for the company's margin profile since export orders have about 5% higher margins than domestic, the management said. Nomura estimates GE Vernova’s Ebitda (earnings before interest, taxes, depreciation and amortization) margin to improve by 90-180 basis points over FY25-28 with a better revenue mix and cost control.

The company’s total order book was at ₹13,000 crore at the end of the June quarter, about 2.8x trailing 12-month sales.

The momentum in the domestic market has also helped other T&D companies in the country. However, GE Vernova reported a better Ebitda margin at 29% in the June quarter, aided by lower raw material cost and higher export orders. Exports accounted for 39% of its quarterly revenue, as against 31% a year ago.

Against this, the Ebitda margin for Siemens Energy, carved out of Siemens Ltd in April, and Hitachi Energy were at 19% and 11%, respectively, weighed down by factors including an adverse product mix and higher other costs. GE Vernova also recorded a notably higher year-on-year revenue growth of 39% during the quarter, as against 20% and 15% by Siemens Energy and Hitachi, respectively. However, in terms of growth in new orders, the picture was different. While GE Vernova’s growth in order inflows was strong at 57%, it was lower than 94% and 3.6x growth for the other two, which were aided by some big-ticket orders.

Nonetheless, GE Vernova stock has surged 49% in CY25 so far, versus 22% for Hitachi Energy, and 20% for Siemens Energy since its listing in June, after the hive-off. At FY26 price-to-earnings, GE Vernova is trading at 84x, according to Bloomberg. Investors anticipate a string of HVDC order awards, which could aid the company's revenue visibility.

Even so, the valuation looks stretched. Moreover, any delay in outsourcing of orders by the parent company in case of any change in global market environment, could be a dampener. Moreover, fluctuation in steel and other raw material prices need close monitoring for their impact on the firm's profitability.