The stock of Hitachi Energy India Ltd (HEIL) has been the top gainer in the BSE 200 index, rising 54 per cent over the last month. In addition to a solid performance in the third quarter of 2025-26 (Q3FY26), strong order inflows and improving earnings visibility led to the gains.
Revenues for the company — a global leader in high-voltage equipment, transformers, and power grids, specialising in technologies that enable the integration of renewable energy (RE) into the grid — grew 29 per cent year-on-year (Y-o-Y) while operating profit was up 107 per cent, and adjusted net profit grew 241 per cent to ₹2,100 crore, ₹350 crore, and ₹290 crore, respectively. The operating profit margin rose by 630 basis points (bps) Y-o-Y to 16.6 per cent, with improvement in operating leverage. Other income rose to ₹62 crore from ₹20 lakh in Q3FY25, mainly on account of higher cash balance after a recent qualified institutional placement (QIP).
Order inflow stood at ₹2,500 crore, mostly with base orders, taking the order backlog to ₹29,900 crore, over 4 times trailing twelve months (TTM) revenue. As one of India's biggest transmission and distribution (T&D) equipment players, HEIL has a product portfolio that makes it a strong competitor in most segments, including renewables, data centres, transportation, and industrial applications.
The company has planned a capital expenditure (capex) of ₹1,500 crore to expand capacity and localisation, although actual progress has been slow with ₹67 crore in the first half of 2025-26 (H1FY26) vs FY26 guidance of ₹750 crore. But the management believes it will meet guidance, and this would double the gross block once completed.
For the first nine months of 2025-26 (M9FY26), operating profit margin reached 14.8 per cent, more than doubling Y-o-Y with 180 bps of sequential improvement in Q3FY26. This was due to faster execution, higher localisation, and cost-optimisation. Higher order inflows on the back of tendering across high-voltage direct current (HVDC), and attempts to enhance the shares of services and of exports to 15 per cent and 25 per cent, respectively, may boost margin more.
India is enjoying a structural change in the power sector, with opportunities in T&D (base and HVDC), renewables, data centre, transportation, and industry. HEIL is a market leader, capable of exploiting both cyclical and structural opportunities across the entire space. The National Electricity Plan (NEP) targets installed capacity of approximately 67 gigawatt (Gw) by 2032, up from 33.5 Gw now. This implies ₹30,000-40,000 crore market opportunity for equipment players with likely tenders for ₹10,000 crore of HVDC orders every year from FY27-FY29.
HEIL, which is working in a consortium with BHEL, is already working on three Indian HVDC projects, and also has a part of an Australian HVDC project. The Mumbai HVDC (1 Gw) is about to be completed while the remaining two projects (each of 6 Gw) have recently been awarded.
The T&D capex cycle may be structurally strong well beyond FY32, with healthy domestic and export demand visibility for next five years or beyond. Management feels that the operating profit margin is sustainable, with potential upsides from operating leverage and localisation benefits. It is witnessing growth momentum in data centres (15 per cent revenue share), railways (expected orders over 15-18 months), and an HVDC pipeline. As such, a high 20s or even 30s percentage growth trajectory for revenues till FY29 looks possible.
In HVDC, HEIL has about 60 per cent market share (in megawatt, or Mw) in already executed and awarded projects. The order book indicates strong revenue visibility, and there are at least five near-term prospects in HVDC, aggregating to 19.5 Gw. As and when export targets are achieved, along with more localisation, the margin and mix would improve further.
In exports, India has the competitive edge of being a low-cost base with adequate quality. Export growth may outperform the domestic market (excluding HVDC), and HEIL could potentially reach an export contribution of 30 per cent to revenue by FY28. HEIL is expanding its presence in select overseas markets. India also serves as a component manufacturing base.
Acceleration in services is also possible, with services contributing 10 per cent of total orders vs 6-7 per cent now. The company has introduced a service business unit from April 2025 to cater to its installed base.
Both exports and services would be margin-accretive. The improving operating profit margins also indicate strong operating leverage — margin has climbed from around 9-10 per cent in FY25 to over 16 per cent, and it could move up a little more and be sustained at 17 per cent.
All the factors appear to point towards stronger growth with higher margins. However, the stock is very highly valued, trading at nearly 85 times price-to-earnings on FY27 estimates. This makes it vulnerable to any slowdowns or misses.
 "Higher growth and margin gains fuel sharp rally in Hitachi Energy India")
