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Schneider Electric Infrastructure, a prominent player in the heavy electric equipment industry, has emerged as a significant wealth generator for investors over the past year. With its shares climbing from ₹175 apiece a year ago to the current level of ₹747, investors have enjoyed an impressive return of 327%.
For instance, an investment of ₹one lakh in the stock a year ago would now be valued at ₹4.3 lakh, showcasing remarkable growth. This performance has positioned Schneider Electric Infrastructure as a standout performer in the Indian equity markets.
The stock has consistently delivered remarkable gains over the last four years. In 2024 alone, the stock has surged by 83% in less than four months, continuing its winning streak for the fifth consecutive year.
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It recorded impressive returns of 149% in the previous year and 56% in the year before that, while offering gains of 25% and 27.5% in CY21 and CY20, respectively. Notably, from its 2019 low price of ₹60.60, the stock is currently trading at a remarkable 1140% higher level.
Schneider Electric is an India-based power distribution company that manufactures, designs, builds, and services advanced products and systems for electricity distribution, such as distribution transformers, medium voltage switchgear, protection relays, and electricity distribution and automation equipment.
Also Read: Sterling & Wilson Renewable Energy gained over 110% in less than 6 months
Positive outlook but valuations stretched
The company stands to benefit significantly from the Revamped Distribution System Scheme (RDSS), initiated by the Indian government as part of power distribution sector reforms.
This scheme comprises two major components: financial support for prepaid smart metering & system metering and the upgradation of Distribution Infrastructure, along with training & capacity building and other enabling & supporting activities.
With expectations of driving a US$37 billion capital expenditure (capex) in distribution system expansion and strengthening over the next five years, the RDSS holds immense potential. Currently, projects worth US$14 billion have been sanctioned under the scheme.
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SEIL is projected to play a pivotal role in over 50% of the total capex outlay, positioning the company to capitalise significantly on the scheme’s implementation, said global brokerage firm Goldman Sachs in its latest report titled “Transition to drive a multi-decade rise in transmission capex.”
With the proposed implementation of the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM) 2026 onwards, which intends to impose tariffs on carbon emissions on goods entering the EU, the brokerage believes that the criticality of energy efficiency improvement will increase significantly, given that it is among the lowest hanging fruits for carbon abatement.
It expects the company to benefit given its energy management expertise, as it offers equipment and services that help in tracking and reducing energy usage in processes.
The Bureau of Energy Efficiency, Ministry of Power, has pegged India’s total energy efficiency market size at USD 9 billion, of which only 5% has been tapped yet, it noted.
Also Read: Govt eyes new geothermal policy, demonstration projects of up to 25 MW
Despite the positive aspects, the brokerage initiated a ‘Sell’ rating on the stock, setting a 12-month target price of ₹470 apiece. The rationale behind this decision is the perceived expensive valuations.
According to the brokerage, the current valuations appear inflated for a business that is predominantly commoditised and offers limited value addition.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 25 Apr 2024, 03:53 PM IST
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