Ambit Capital on Thursday in a note titled ‘Voltage too high, be cautious’ said the strong electrification theme that gathered pace after Covid, driven by robust demand in transmission and distribution, is now largely priced into valuations, while risks loom beyond FY28.
The domestic broking firm said high-voltage transmission equipment remains undersupplied, but the demand-supply gap is likely to narrow in the next two to three years as companies expand capacity. This, it cautioned, could limit margins.
On stock preferences, Ambit Capital placed ABB India at the top of its pecking order with a ‘Buy’ rating, arguing that consensus downgrades have bottomed out and recent concerns will prove temporary. In contrast, it initiated ‘Sell’ ratings on CG Power, Siemens and Siemens Energy, though it acknowledged some upside optionality in Siemens Energy through its HVDC exposure.
Ambit Capital set Rs 2,900 as target price for Siemens, Rs 3,300 for Siemens Energy India and Rs 650 for CG Power & Industrial, hinting at 6-18 per cent potential downsides. For ABB India, Ambit suggested a price target of Rs 6,200.
According to Ambit, order growth for high-voltage transformers and switchgears is expected to peak by FY26–27, aided by front-loading of orders, but could plateau from FY28 as battery energy storage systems (BESS) reduce the requirement for additional infrastructure. The original National Electricity Plan (NEP) also suggests a more than 30 per cent decline in high-voltage transmission installations between FY27 and FY32 compared to FY22–27. While execution delays may stretch some growth, the overall trajectory points to deceleration.
The brokerage flagged the phased removal of inter-state transmission system (ISTS) waivers and the rise of BESS as key negatives not fully reflected in current estimates. At the same time, intensifying competition from global majors like Schneider, WEG and Nidec poses additional risks, even as incumbents such as ABB, Siemens and CG Power continue to expand penetration beyond tier-1 cities.
Ambit Capital noted that valuations of key players have already corrected sharply from 2024 peaks — ABB and Siemens fell 45–50 per cent, while CG Power dropped over 25 per cent. Yet, it still sees downside risks to consensus estimates, particularly for CG Power and Siemens, as margins have peaked and returns are expected to decline from FY24 highs.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.