TD Power Systems: Global demand fuelling growth visibility - Company Update

We upgrade TD Power to BUY / revise our target price upwards to Rs 875 (vs. Rs 840 earlier). Q3-FY26 results were a tad lower than our expectations and reflect timing issues rather than demand or competitive weakness. Going ahead, the Tumkur facility ramp-up should materially improve execution and operating leverage. Record order book and direct exposure to a multi-year global power generation cycle driven by data centers, industrial capex and grid stability confirms strong earnings visibility over the medium term. The company’s leadership in sub-100 MW generators and deep OEM partnerships reinforce our positive stance. Our estimates remain unchanged with a revenue/EBITDA/PAT CAGR of 26-28% over FY25-28E.

One-Off Q3 miss, momentum Intact:

TDPS reported Q3FY26 revenue/EBITDA/PAT of Rs 4,427 mn/Rs 804 mn/Rs 563 mn, up 25%/31%/25% YoY but down 2%/3%/6% QoQ. For 9M-FY26, revenue, EBITDA and PAT grew 36.2%, 40.3% and 37.0% YoY, respectively. While underlying momentum remains strong, Q3 revenue missed our estimate by ~9% due to a one-off relocation of critical machinery from the existing plant to the new Tumkur facility; we expect the shortfall to spill over into Q4FY26. Gross margin expanded 180 bps YoY and 220 bps QoQ to 35.1%, while EBITDA margin stood at 18.2% (+70 bps YoY, -10 bps QoQ), reflecting higher opex linked to the new facility, with utilization set to ramp up meaningfully in Q4FY26.

Order Inflows validate structural growth cycle:

TDPS posted a strong Q3FY26 order intake of Rs 6.6bn (+61% YoY, +25% QoQ), lifting the order book to Rs18.4 bn (+41% YoY, +16% QoQ), driven by exports. Management expects order inflows to remain strong, validated by positive commentary from global power OEMs. With a clear moat in sub-100 MW generators and long-standing OEM partnerships, TDPS is well placed to benefit from this cycle, supporting continued order momentum, improved execution and a strong finish to FY26.

Global Power OEMs flag sustained and multi-year demand:

Commentaries from major OEMs such as GE Vernova, Caterpillar, Mitsubishi Heavy Industries, and Siemens Energy for the last two-quarters points to a multi-year, structural upcycle in power demand, driven by increasing reliance on on-site captive generation for data centers, industrial facilities and grid stabilization. These OEMs highlighted strong order books, capacity additions and firm pricing across gas engines and gas turbines used for distributed/prime power, underscoring the strong export-led demand across the power generation ecosystem which TDPS currently benefits from.

Valuation and View:

We roll forward our valuation to Dec-2027E and upgrade our rating to BUY, while keeping our estimates unchanged. Valuing the stock at an unchanged 40.0x Dec-2027E EPS and 28.0x Dec-2027E EBITDA, we arrive at a TP of Rs875 (vs Rs840 earlier). Key Risks: Worsening of cash conversion, and slowdown in global industrial capex in the energy sector.

Company website: https://www.tdps.co.in/

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Analyst:

• Mohit Surana - Senior Research Analyst, Institutional Equities (NISM-202300189881)
• Mohd Haris - Research Associate, Institutional Equities (NISM-202400161268)

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FAQs on TD Power System Ltd. Q3FY26 Company Update

Overview: TD Power Systems has been gaining investor attention due to strong global demand for power generation equipment and a growing export order book. Below are key questions investors often evaluate when assessing the company’s outlook.

1. What drove TD Power Systems’ recent growth?

Growth has been driven primarily by strong export demand for generators used in power generation, industrial facilities and distributed energy systems.

2. Why did the company miss expectations in Q3FY26?

The Q3FY26 performance was slightly below estimates due to the relocation of machinery to the new Tumkur manufacturing facility, which temporarily impacted production timelines.

3. How strong is TD Power Systems’ order book?

The company reported an order book of approximately ₹18.4 billion, supported largely by export demand and growing global requirements for power generation equipment.

4. What industry trends support TD Power Systems’ growth?

Rising electricity demand from data centers, industrial expansion and grid stability requirements are driving a multi-year global demand cycle for power generation equipment.

5. What risks should investors monitor?

Key risks include potential slowdown in global industrial capital expenditure, changes in export demand dynamics and working capital management challenges.