Hitachi Energy, CG Power, GE Vernova shares today
Panic selling in shares of power equipment-related companies entered a second day on Friday, January 8, as concerns continued to mount on the growth outlook for the pack.
Investors have been dumping shares of Hitachi Energy, CG Power, Siemen Energy, and GE Vernova T&D amid reports that the Government may allow Chinese companies to bid for government contracts, particularly in the infrastructure, power, and manufacturing space.
To be sure, neither the government nor any company has confirmed the development.
Still, Hitachi Energy India share price cracked 5.6 per cent on the BSE in the intraday trade today, adding on to its 5.8-per cent slide on Thursday.
Similarly, GE Vernova T&D shares, too, plunged 5.8 per cent intraday, falling 10.3 per cent in two days. CG Power and Industrial Solutions shares slipped 4.2 per cent, Siemens Energy India declined 3.1 per cent, and L&T 0.1 per cent in the intraday trade.
However, shares of Bharat Heavy Electricals Ltd, which tumbled 14 per cent yesterday, recouped losses to jump 5 per cent intraday today. By comparison, the BSE Sensex index was lower by 0.29 per cent at 11:18 AM.
Why are Hitachi Energy, GE Vernova shares falling?
Shares of power-equipment related companies have been nursing losses amid reports that the Union Ministry of Finance is considering rolling back the 2020 procurement restrictions that limited Chinese companies from bidding for government contracts.
Before 2020, India allowed Chinese firms to freely participate in government tenders and invest via the automatic foreign direct investment (FDI) route, leading to their strong presence across power, telecom, infrastructure, and startups.
India, however, put strict restrictions in place following the June 2020 Galwan clash. As a result, India tightened its FDI norms, and restricted Chinese participation in sensitive sectors, resulting in highly selective and regulated engagement, particularly in government and strategic projects.
Why is the government lifting restrictions on Chinese import?
Before the restrictions, Indian heavy electrical equipment manufacturers imported significant quantities of heavy castings, rotor forgings and seamless pipes for power projects from China. Since 2020, however, the manufacturers are importing such components / equipment from Europe, leading to higher cost and delay in project execution due to the limited thermal power supply chain supplier base in Europe, Russia and Japan.
The removal of these restrictions, analysts believe, may revive competition, reduce costs, and speed up execution of public and private projects, particularly in infrastructure, power, and manufacturing.
“While further details are awaited, we believe BHEL and L&T could face incremental competitive pressure in the BTG (boiler, turbine, generator) segment if Chinese players are permitted to bid for government contracts, given their historical involvement,” noted analysts at PL Capital in a recent note.
Chinese players, according to them, had a meaningful presence in the BTG segment prior to 2020, particularly in private-sector orders, driven by competitive pricing and EPC capabilities.
However, following the amendment of Rule 144(xi) under GFR 2017, their participation has been negligible. “While any rollback of curbs could impact the BTG segment given its historical exposure, we believe actual re-entry is likely to remain limited, owing to the segment’s strategic importance and control-related sensitivities,” the note explained.
JM Financial added that given the urgency for capacity addition in both thermal power and transmission systems, the government may also exempt certain transmission components or input materials like CRGO coils, and critical materials (including forgings and castings) required for boiler, turbine and generator from such restrictions.
Investment strategy: Buy the dip?
Amid lack of clarity, analysts anticipate that in the event of the Government allowing Chinese players to participate in the power equipment segment, the government may mandate local manufacturing for such players.
Besides, they expect the recent CEA’s notification to localize 16 critical components – including switchgear, insulators, and voltage transformers – to cushion any blow.
“The notification, once implemented, is expected to support the domestic T&D cycle, curb low-cost dumping by Chinese suppliers, and reduce India’s high import dependence, thereby structurally benefiting domestic T&D manufacturers such as CG Power, Siemens Energy, Hitachi energy, GE Vernova T&D India,” PL Capital added.
Echoing similar views, those at JM Financial Institutional Securities said removal of restrictions at the components level (e.g., CRGO steel) may benefit public sector undertakings (PSUs) like BHEL.
“Even broad-based removal (e.g., BTG) will have little impact due to developers’ previous experience with Chinese sets and the large domestic demand within China. We remain optimistic about sustained thermal opportunities and BHEL’s performance (execution, margins),” the brokerage said with a ‘Buy’ rating and a share price target of ₹363 on BHEL stock.
The brokerage expects BHEL’s Ebitda margin to expand from 4.4 per cent in FY25 to at least 10.7 per cent in FY28, with the earnings per share (EPS) growing from 1.5 in FY25 to 12.1 in FY28.
