The country has seen a huge creation of power generation capacity in the last decade but transmission and distribution has always been a bottleneck in the power sector reform process. The present government has realised the problem and this has translated into order inflows to various transmission and distribution companies in the last 6-9 months. This will reduce the NPAs in the power sector and help improve the working of power generation and dis-coms leading to better financials over the next many years. Alstom is a global leader in the world of power generation, power transmission and rail infrastructure and sets the benchmark for innovative and environmentally friendly technologies. Alstom T&D India (globally known as Alstom Grid), is a market leader in the Indian power transmission sector. It has a strong portfolio of products, solutions and services, comprising of the entire range of transmission equipment including air-insulated switchgear and locally manufactured power transformers and gas-insulated switchgear. Alstom T&D reported an improved set of Q4 FY16 numbers with the total income at Rs 978 crore with EBIDA margins of 9.30% and operating profit of Rs 70 crore. EPS for FY16 is Rs 3 on face value of Rs 2 per equity share on a small equity capital of Rs 51.21 crore with a book value of Rs 54. The company has a track record of 90% dividend payout. Huge capex is being made by Powergrid and other companies in the power transmission and distribution space. Hence, most analysts and foreign institutional investors are expecting big gains from power transmission equipment players comprising of companies making transformers, circuit breakers, switch gears, etc. Alstom T&D is in the forefront of all this and seeing shoots happening in the sector. The stock is trading on the Indian bourses at Rs 340 and can deliver a 30% appreciation from the current levels in one year time horizon. Alstom T&D India is future ready to support the rapidly evolving transmission sector in India and the stock is a good buy for portfolio investors.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.