Tag Q2 FY25 Results

Techno Electric & Engineering Q2 Results: 4.88% YoY Profit Decline

Company Overview

Techno Electric & Engineering Company Limited (TEECL) founded in 1963 with headquarters in Kolkata, is a leading Indian company specialising in Engineering, Procurement, and Construction (EPC) services for the power sector. It also has a strong presence in Renewable Energy through its wind power generation segment. It has expertise in developing power transmission, distribution, and substation projects and focuses on the efficient execution of turnkey solutions for high-voltage substations and industrial electrification. Operates wind energy projects with an installed capacity of 129.9 MW spread across Tamil Nadu. Techno Electric aims to expand its portfolio in renewable energy and smart grid technology while also focusing on digital transformation in the power sector. The company is strategically positioned to benefit from India’s push for green energy.

Industry Outlook

India’s power demand is expected to grow at a CAGR of 6-7% over the next decade due to population growth, industrial expansion, and increasing per capita energy consumption. India’s power sector is the third-largest in the world in terms of installed capacity, standing at 425 GW (as of 2024). Renewable energy accounts for 40% of the total installed capacity, with solar and wind energy playing pivotal roles. Thermal Power still dominates the generation capacity but is witnessing a decline due to environmental regulations and rising fuel costs. Renewable energy capacity is projected to reach 500 GW by 2030, aligning with India’s commitment to achieving net-zero emissions by 2070. Smart grid technology is expected to grow at a CAGR of 10%+ in India. Companies like Techno Electric are well-positioned to benefit from this transformation due to their focus on renewable energy and smart grid solutions.

Financial Summary

INR Cr.	Q1 FY25	Q2 FY25	FY23	FY24
Revenue	375	441	830	1502
EBITDA	52	70	87	210
OPM	14%	16%	11%	14%
PBT	117	105	233	319
Net Profit	98	94	187	268
NPM	26.1%	21.3%	22.5%	17.8%
EPS	9.12	8.10	17.36	24.98
C&CE	162	191	146	137

Business Segments:

• Power Generation: TEECL offers turnkey solutions for captive power plants, specializing in the balance of plant and flue gas desulphurization (FGD).
• Transmission & Distribution: The company excels in EHV substations up to 765 kV, advanced metering infrastructure, and STATCOM installations, ensuring robust transmission and efficient distribution networks.
• Data Centres: TEECL provides comprehensive solutions for data centers, encompassing design and engineering, civil and structural works, fire protection systems, water and allied systems, and plant electrical and illumination systems.
• Industrial Sector: In the industrial domain, TEECL offers MEP works, procurement of long-lead equipment, and solutions for power-intensive industries. The company specializes in executing less capital-intensive projects with a high risk-reward ratio, including captive waste heat recovery and conventional power plants of up to 200 MW on a turnkey basis.

Subsidiary Information:

• Techno Infra Developers Pvt Ltd: It focuses on Renewable energy development and infrastructure projects. Owns and operates wind energy assets that contribute to TEECL’s clean energy portfolio. It facilitates the expansion of renewable energy capacity for long-term sustainability.
• Techno Green Energy Ltd: Manages wind farms in Tamil Nadu, supporting TEECL’s clean energy initiatives. Contributes to steady cash flows through Power Purchase Agreements (PPAs) and it focuses on wind energy projects for the parent company.
• Techno Wind Power Pvt Ltd: It focuses on the development and operation of wind energy farms and its role is to expand TEECL’s renewable energy capacity in high-wind potential regions.
• Techno Power Transmission Ltd: It implements power transmission projects in partnership with utilities. And focuses on EPC and power transmission. Enhances TEECL’s ability to secure and execute high-value contracts.
• Techno Renewable Energy: It manages solar and wind energy assets to align with the renewable energy push and focus on renewable projects for the parent company. Positions TEECL as a significant player in India’s green energy transition.

Q2 FY25 & Business Highlights

• Revenue of ₹441 crore in Q2 FY25 is down by 4.51% YoY from ₹462 crore in Q2 FY24.
• EBITDA of ₹70 crore in this quarter at a margin of 16% compared to 17% in Q2 FY24.
• Profit of ₹94 crore in this quarter compared to a ₹74 crore profit in Q2 FY24.
• We have already received 4 sites from Adani and Power Grid, and we are confident to make it up in batch 2 as we have a robust order book and clear visibility of additional opportunities in the T&D sector.
• There has been delay in handing over of sites by various clients like Power Grid, IndiGrid, Apraava or Adani.
• The current investment and cash are around INR 2600 crores, about INR2.25 per share.
• The present peak growth demand is about 240 gigawatts or more, and this is likely to be 400 gigawatts by 2030. Thus, per capita consumption will be no less than 1,700 units by 2030 as against 1,200 units today.
• We have an extremely robust order book of around INR 9725 crores as of September 2024 and ₹642 crore as booked in this quarter.

SWOT Analysis:

Strengths:

1. Diverse business portfolio catering to multiple sectors.
2. Robust financial stability ensures resilience.
3. Market leadership in renewable energy initiatives.
4. Secure long-term contracts providing consistent revenue streams.

Weaknesses:

1. High Dependence on Government Policies Impacting Operations.
2. Limited international footprint, reducing global market share.
3. Concentration in specific sectors restricts growth potential.

Opportunities:

1. Expansion in renewable energy projects to meet rising demand.
2. The adoption of digital energy solutions enhances efficiency.
3. Leverage the global shift toward sustainable energy for growth.

Threats:

1. Uncertainty from regulatory and policy changes.
2. Intense competition within the energy sector.
3. Delays in project execution affect timelines and costs.
4. Volatility in energy prices is impacting profitability.