US power equipment curbs: Macquarie sees 16% to 35% upside in BEL, GE Vernova, 5 other stocks 

Macquarie’s August 27 India Industrials report carries ‘Outperform’ ratings on eight stocks. Among the names with disclosed upside in the report, Bharat Electronics has the highest potential at 35%, followed by Siemens Energy India at 32%. GE Vernova T&D India are next at 26% each.

The brokerage said the US order could work in favour of Indian grid companies because India is not subject to US arms embargoes or sanctions, while several Indian manufacturers already supply equipment to the American market.

“We believe the order is generally more an opportunity than a threat,” Macquarie said.

Macquarie on Hitachi Energy India: ‘Outperform’

Macquarie has set a target price of Rs 38,500, indicating an upside of 16%.

Hitachi Energy is among the Indian companies already supplying the US with large power transformers, switchgear and circuit breakers, HVDC and grid-control systems, protection and automation systems, and data-centre power transformers.

Macquarie says 26% of Hitachi Energy’s production from India is exported, giving the company an established overseas supply base.

Macquarie on Cummins India: ‘Outperform’

Macquarie has set a target price of Rs 6,150, indicating an upside of 18%.

Cummins India features among the brokerage’s preferred industrial stocks in its India Industrials coverage, alongside companies exposed to power, equipment and infrastructure spending.

Macquarie on Larsen & Toubro: ‘Outperform’

Macquarie has set a target price of Rs 4,910, indicating an upside of 21%.

Larsen & Toubro is included among Macquarie’s preferred industrial companies as power and infrastructure spending remains an important demand driver.

Macquarie on GE Vernova T&D India: ‘Outperform’

Macquarie has set a target price of Rs 5,470, indicating an upside of 26% from current levels. .

GE Vernova T&D India has a direct connection to the US supply opportunity discussed in the report. The company supplies transformers, switchgear and HVDC and grid-control systems, along with protection and automation equipment and data-centre power transformers.

Macquarie says 33% of GE Vernova’s production from India is exported, giving it the highest export share among the major Indian grid equipment suppliers specifically cited in the report.

Macquarie on CG Power: ‘Outperform’

Macquarie has set a target price of Rs 1,090, indicating an upside of 26%  from current levels..

CG Power is listed among Indian suppliers of data-centre power transformers, although its exports from India account for less than 5%.

Macquarie includes the company among the Indian grid and industrial names that could benefit as US power-equipment sourcing changes.

Macquarie on Siemens Energy India: ‘Outperform’

Macquarie has set a target price of Rs 4,400, indicating an upside of 32%  from current levels..

Siemens Energy India supplies several categories of equipment to the US, including large power transformers, switchgear and circuit breakers, HVDC and grid-control systems, protection and automation systems, and data-centre power transformers.

Macquarie says 29% of Siemens Energy’s production from India is exported, giving the company an established base for potential growth in US shipments.

Macquarie on Bharat Electronics: ‘Outperform’

Macquarie has set a target price of Rs 550, implying 35% upside from current levels, the highest among the stocks in the brokerage’s India Industrials snapshot.

Bharat Electronics carries an ‘Outperform’ rating in the report, although Macquarie’s table of Indian companies supplying the specific bulk-power equipment categories to the US does not include the company.

Why the US order could benefit Indian power companies

The US executive order discussed by Macquarie restricts certain foreign supplies of bulk-power system electric equipment, covering transformers, reactors, generation equipment and control systems used in power plants, substations and transmission networks of 69kV or above.

Macquarie notes that India is not subject to US arms embargoes or sanctions. Indian grid equipment companies are already supplying the US, giving them an existing commercial base as American sourcing requirements change.

The brokerage specifically lists GE Vernova, Hitachi Energy, Siemens Energy and CG Power among Indian companies supplying equipment to the US. Its data shows that GE Vernova exports 33% of its India production, Siemens Energy 29%, Hitachi Energy 26% and CG Power less than 5%.

Macquarie expects the opportunity to be particularly relevant for Indian grid companies that can increase exports as US utilities and other buyers seek equipment from suppliers outside the restricted countries.

Macquarie’s Power & Industrials picks ranked by upside

Conclusion: Macquarie’s report links the US sourcing change with the opportunity for Indian power and industrial companies. Bharat Electronics has the highest target-price potential in the list, while Siemens Energy India, GE Vernova T&D India and Hitachi Energy India have established US supply links that connect them directly with the opportunity described by the brokerage.

Disclaimer

This article is based on Macquarie Equity Research and its published views, ratings and target prices. The information is provided for informational and educational purposes only and should not be construed as investment advice, a recommendation, solicitation or an offer to buy or sell any security. Stock prices can move materially, and past performance does not guarantee future returns. Readers should conduct their own research and consult a SEBI-registered investment adviser before making any investment decision. The publication and its authors do not accept responsibility for any investment losses arising from decisions taken solely on the basis of this article.