We discussed growth prospects of key companies such as HPL Electric & Power Ltd, Voltamp Transformers Ld, among others, and what the future holds in store for them.
Since then, several companies have emerged in this space, all planning big things for their switchgear vertical.
In this article, we look at a few of these switchgear stocks that are still under the radar.
As switchgears will continue to play a key role, acting as a proxy for various growth sectors like data centres and electrical equipment, these companies have a long runway ahead of them.
Aartech Solonics
Aartech Solonics is a system solution-oriented R&D enterprise in the field of specialized and selected energy appliances.
The company manufactures electricity distribution and control apparatus.
It caters to various growth sectors, including renewable energy, power transmission and distribution, defence and exploration, and healthcare, among others.
Aartech has some of the big names such as Bharat Heavy Electricals Ltd, NTPC Ltd, Steel Authority of India Ltd, Hindalco Industries Ltd, Larsen and Toubro Ltd, Siemens Ltd, ABB India Ltd, and DLF Ltd as its clients.
It also has two subsidiaries that deal in energy storage applications and startup ecosystems.
The company’s sales and net profit have grown at a compounded annual growth rate (CAGR) of 19% and 21%, respectively, over the past five years.
In FY21, the company undertook the world’s largest reverse osmosis plant project at Abu Dhabi and India’s largest nuclear power plant with its fast bus transfer system solutions.
Aartech’s fast bus transfer systems (BTS 2000) have been deployed in numerous thermal power plants to ensure reliable and efficient power generation.
In the past one year, shares of the company have gained 15%.
Veto Switchgears
The company manufactures wires and cables, electrical accessories, and also deals in LED lighting, CFL, and fans.
Veto has a wide distribution network in Rajasthan, Uttar Pradesh, Madhya Pradesh and other states, with around 12 depots across India.
It also has various subsidiaries namely Veto Overseas, Veto Electricals, and Veto LED Lighting. Veto Overseas is based in Dubai and is mainly involved in the trading of electrical goods like fans, sockets, fittings, fixtures, wires, and cables, etc.
While Veto Electricals is a 100% export-oriented entity, and exports aluminium wires to the Middle East.
Over the past five years, the company’s sales and net profit have grown at a CAGR of 6.6% and 9.3%, respectively.
The company’s margins were impacted in FY24 owing to intense competition, due to which Veto could not stick to its pricing power. Commodity costs also took a toll.
Nevertheless, the outlook is now very positive owing to the demand for its products picking up.
Going forward, the company’s market position in the wires and cables business, and its growing presence in other states, is expected to improve financials.
In the past one year, shares of the company have gained 12%.
RTS Power Corporation
The company is the flagship firm of the Kolkata-based Bhutoria Group.
It’s involved in the business of manufacturing, marketing and providing power-conversion and power quality solutions through manufacturing of extra high voltage power, distribution transformers, dry-type transformers, cables and conductors of various capacities, and galvanised iron wires and strips.
The company has an established clientele base, including big names such as L&T.
Over the past three years, the company’s sales and net profit have grown at a CAGR of 22% and 21%, respectively.
In FY24, it witnessed a lower scale of operations as raw material prices moved a lot while demand remained stagnant.
Nevertheless, the outlook from here on looks good as it has a healthy order book. It also caters to the export market for EPC contractors such as L&T and other renowned companies.
In the past one year, shares of the company have moved up by 120%.
Other switchgear stocks
In addition to the above names, two other companies, Shri Ram Switchgears Ltd and Integra Switchgear, are making big strides in the industry.
The only concern is both are loss-making.
Shri Ram Switchgears is engaged in the engineering and manufacturing of electrical products.
While Integra manufactures electrical switches and other electrical products.
You could track both these companies as and when they become profitable or show green shoots.
In conclusion
As the power and data centre industries gear up for multiple advancements, proxy sectors like switchgear could become mainstream in the coming months.
Prospective investors should undertake thorough research to evaluate market conditions, company fundamentals, and broader economic indicators.
While the outlook remains optimistic, careful assessment of the associated risks and opportunities in this evolving sector is essential for making well-informed investment decisions.
Happy Investing.
Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
