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Energy and power transmission sector stocks in the Indian stock market have surprised investors by giving extraordinary returns in the last few years. Due to the increasing demand for energy and modernization of the power grid across the country, the order book of companies associated with this sector is rapidly strengthening. In this sequence, a power transmission company has issued another big positive update for its investors. According to an exchange filing, the company has won a new significant work order worth ₹134 crore.
The company has already proven to be a big multibagger for long-term investors, growing its shareholders’ equity multi-fold by jumping nearly 5,880% during the last 5 years.
Highlights of new work order worth ₹134 crore
According to the information given by the company in the regulatory filing, this new order is related to construction, designing, testing and installation of infrastructure of power transmission lines.
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Project Scope: This contract includes supply and erection of high capacity transmission lines, sub-stations and related grid equipment.
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Execution Timeline: The company will have to complete this project in a phased manner within the stipulated time frame, which will strengthen the revenue visibility of the company in the coming quarters.
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Impact on Margins: These types of contracts in the transmission and EPC segments play an important role in supporting the company’s operating margin (EBITDA Margin) and bottom-line profits.
Journey of wealth creation of 5,880% in 5 years
This stock has an excellent track record in terms of long-term wealth creation. Investors who were in this stock 5 years ago have got a multibagger return of 5,880%.
If we understand the mathematics of historical data, then if an investor had invested ₹ 1 lakh in this share 5 years ago and held it patiently, then today the market value of that investment would have increased to approximately ₹ 59.8 lakh. This performance shows how strong fundamentals and consistent project pipeline can take a company’s market valuation to new heights.
Main reasons for growth in power transmission sector
The power transmission and distribution sector in India is going through a major transformation. The following major fundamental factors are working behind this rally:
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Grid Integration of Renewable Energy: Solar and wind energy projects are expanding rapidly in India. It has become mandatory to build new and modern transmission corridors to connect these green energy plants to the main national grid.
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Government Policies and Capex: Record capital expenditure (Capex) is being undertaken by the central and state governments to upgrade power infrastructure.
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Continued growth in order book: The demand for transmission equipment, towers and conductors is continuously increasing in the domestic as well as international markets.
What is your focus on financial situation and upcoming triggers?
With the addition of new orders worth ₹134 crore, the size of the company’s total un-executed order book has further strengthened. The strong order pipeline is expected to sustain the company’s revenue and profit after tax (PAT) for the upcoming financial year.
Market analysts believe that during the boom in power infrastructure companies, investors should also keep a close eye on the company’s debt-to-equity ratio (debt level), working capital cycle and execution speed. Timely completion of new projects ensures continuity of profits.
This new contract worth ₹ 134 crore received by the power transmission company is an indication that the company still has a strong ability to win new projects. This stock, which has given 5,880% returns in 5 years, will remain on the radar in the market in the coming quarters on the basis of its earnings growth and project delivery.