Nuvama Institutional Equities has released its latest analysis on India's capital goods and power equipment sectors, highlighting strong execution in high-voltage transmission and distribution (HV T&D) companies during Q1FY27, even as ordering growth shows signs of moderation. The brokerage firm has identified Voltamp Ltd and Bharat Heavy Electricals Ltd (BHEL) as its preferred picks, citing valuation comfort and potential for margin recovery.
Q1FY27 Sector Performance and Outlook
According to Nuvama's report, HV T&D players recorded an impressive aggregate revenue growth of 41.9% year-on-year in the first quarter of fiscal year 2027. Operating margins expanded by 220 basis points, reaching 21.5%, indicating robust operational efficiency. However, order inflows increased at a slower pace of 11.1% year-on-year, with Nuvama cautioning that rising supply could introduce margin risks over the next 18 to 24 months.
Valuations across many power and non-power peers remain elevated, trading at 50 to 60 times estimated FY28 earnings per share (EPS). In this context, Nuvama finds Voltamp attractive at 25 times FY28E and BHEL at 30 times FY28, attributing their appeal to recovering margins and growth driven by execution.
Key Recommendations and Target Prices
- Voltamp Ltd: Preferred pick with a target price of Rs 12,000. Nuvama favors Voltamp for its early margin recovery and growth runway supported by industrial capex, renewable energy, and data centers.
- Bharat Heavy Electricals Ltd (BHEL): Also a preferred pick, with a target price of Rs 530, driven by operating leverage-led margin recovery anticipated in FY27.
- Larsen & Toubro Ltd (L&T): Considered attractive for long-term growth, especially following the resolution of the West Asia crisis. Nuvama suggests a target of Rs 4,065.
- Siemens Energy: Nuvama remains positive on Siemens Energy within the HV T&D space, setting a target price of Rs 3,483.
- CG Power: Also viewed positively in the HV T&D segment, with a target price of Rs 1,000.
- Other Targets: The brokerage also suggested targets for Hitachi Energy (Rs 35,400), GE T&D (Rs 4,635), and KEC International (Rs 455).
Power and Non-Power Industrial Segments
Power T&D Cycle
India's transmission and distribution cycle continues to be robust, bolstered by the Central Electricity Authority's ambitious 900GW non-fossil roadmap by FY36, which implies a substantial transmission capital expenditure of Rs 7.93 lakh crore. This provides strong visibility for manufacturers of transformers, GIS, HVDC equipment, and transmission EPC players. Structurally, Nuvama is positive on HV T&D due to strong backlog-led execution and upcoming HVDC awards. However, near-term upside may be capped by plateauing ordering and limited HVDC visibility beyond specific projects in FY27 and FY28.
Non-Power Industrials
Beyond the power sector, demand is showing signs of revival across non-power industrial segments. Enquiries are improving in sectors such as metals, oil and gas, commercial real estate, data centers, semiconductors, and electronics. This resurgence is supported by the RBI's capacity utilization factor remaining above 75% in March 2026. While revenue growth in non-power industrials improved to 14.8% year-on-year, margins contracted by 320 basis points due to commodity inflation. Ordering momentum, however, remains strong, with base inflows rising 21.5% year-on-year for three consecutive quarters.
Overall, Nuvama concludes that while HV T&D companies demonstrate strong execution, slower ordering and potential for new supply could pressure margins. The firm prefers Voltamp and BHEL for their valuation comfort and margin recovery, while maintaining a positive outlook on Siemens Energy and CG Power. The brokerage awaits a broader upcycle in private capital expenditure, with data center spending providing an additional tailwind.