Goldman Sachs upgrades Schneider Electric Infra to 'Buy'; sees 21% upside

Goldman Sachs upgraded Schneider Electric Infrastructure Ltd to a 'Buy' rating from 'Sell', citing a sharp expansion in India's medium-to-long-term total addressable market (TAM) for power distribution equipment.
The brokerage has also raised its 12-month target price to ₹910 per share, implying an upside potential of around 21 per cent. On Thursday, the stock fell as much as 2.42 per cent to ₹765 per share. The stock pared losses to trade 2 per cent lower at ₹764 apiece, compared to a 0.04 per cent decline in Nifty50, as of 11:10 AM.
The upgrade comes on the back of rising electricity demand, widening power deficits, and the urgent need to upgrade India's power distribution infrastructure, the global brokerage said in a report on June 16. Goldman Sachs now expects India's power transmission capital expenditure to exceed $550 billion by the financial year 2050 (FY50), nearly 30 per cent of the country's overall energy transition capex requirement. Track LIVE Stock Market Updates Here
An inflection in power demand growth is likely to elevate the importance of continued grid expansion and upgrade, including low- and medium-voltage distribution networks, transformers, switchgear and intelligent breakers, the brokerage said. It added that Schneider Electric's upcoming capacity expansions in circuits and breakers place it in a strong position to benefit from this structural trend.
Schneider Electric is expanding its Vadodara switchgear plant by adding 6,000 panels to the existing 8,000 panels capacity, and scaling up its Kolkata breakers plant from 5,000 units to 50,000 units. These initiatives, along with margin improvement and order inflow momentum, support the revised earnings estimates, Goldman Sachs said.
The firm now forecasts a 27 per cent earnings CAGR for the company during FY25 to FY28, compared with its previous estimate of 8 per cent. The order inflow CAGR is also raised to around 31 per cent from 15.5 per cent earlier.
Gross margins rose 150 basis points year-on-year in FY25 to 38.2 per cent, driven by better pricing, product mix and cost efficiencies. Goldman Sachs now expects gross margins to improve further to 39.6 per cent by FY32.
The research note highlights four key reasons for the upgrade: a significantly higher TAM with increased market share expectations, a stronger margin outlook, potential for valuation re-rating, and government support through schemes such as the Revamped Distribution Sector Scheme (RDSS).
Since April 2024, Schneider Electric stock has underperformed broader markets, falling 4.3 per cent while the BSE Sensex gained 11.9 per cent. However, with rising urgency to reduce power distribution losses, currently at around 18 per cent of domestic supply, the brokerage expects the company to be a major beneficiary of distribution-led grid investments.

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