The brokerage firm Goldman Sachs has upgraded Schneider Electric Infrastructure to ‘Buy’ from ‘Sell’. In its latest research note, the brokerage firm has also revised the 12-month target price on Schneider Electric shares to Rs 910, up from Rs 505 earlier, implying a potential upside of nearly 26% from current levels. It values the stock at 41x FY27E P/E, which Goldman Sachs notes is “near 1SD below historical mean.”
Goldman Sachs on Schneider Electric: Power demand surge could trigger grid investment boom
As per the brokerage report, one of the biggest drivers for this rating upgrade is the expected rise in power demand in India.
Goldman Sachs in its report noted, “an upcoming inflection in power demand growth in India could widen power deficits in the medium term.” This increases the urgency for grid expansion and upgrades, especially in low and medium voltage distribution networks, which include switchgear, transformers, and intelligent breakers.
Goldman Sachs estimates India’s power transmission capex requirement could exceed USD 550 billion by FY50, accounting for about 30% of the total energy transition capital outlay.
Goldman Sachs on Schneider Electric: Capacity expansion
Schneider Electric is already moving to ramp up capacity. The company plans to invest Rs 200 crore towards expanding production at its Vadodara switchgear plant (adding 6,000 panels) and Kolkata breakers plant (adding 45,000 breakers to an existing capacity of just 5,000).
This aligns with Goldman Sachs forecast of a 31% order inflow CAGR between FY25 and FY28, up sharply from their earlier estimate of 15.5%. The report added, “We forecast a 27% earnings CAGR for FY25-28E (previously 8%).”
Goldman Sachs on Schneider Electric: Market share and margin outlook
Goldman Sachs has also revised its outlook on Schneider Electric’s addressable market and its share in it. The Total Addressable Market (TAM) has been revised upward to USD 14.53 billion by FY32, from an earlier USD 9.02 billion.
As a result, the brokerage now expects Schneider Electric’s market share to reach 3.3% by FY32, compared to the earlier projection of 2.9%.
Margins are another area where Schneider Electric is showing improvement. The report highlighted that gross margin in FY25 was 38.2%, up 150 basis points from the previous year. It added, “We raise our gross margin forecast to 39.6% by FY32 (from 38.5%), as we expect further increase in scale could enhance the company’s cost efficiency.”
Goldman Sachs on Schneider Electric: Valuation may catch up
Goldman Sachs pointed out in its report that Schneider Electric has underperformed recently, especially when compared to peers like Hitachi Energy India. Since the brokerage initiated a Sell rating on Schneider Electric in April 2024, the stock fell 4.3%, while the BSE Sensex gained 11.9%. Over the past year, Schneider Electric has also lagged Hitachi Energy by as much as 72%.
Goldman Sachs on Schneider Electric: Government support
Goldman Sachs sees government-led schemes such as the Revamped Distribution System Scheme (RDSS) as another growth lever. Though the rollout of RDSS has seen delays, the brokerage now assumes a 1 to 2 year extension and believes the visibility is improving.
“Projects worth USD 33 billion are being authorised under the scheme,” the report noted.
