TD Power Systems - Robust quarter; Large Generator Bet Strengthens Outlook | Company update

TD Power reported a strong Q4FY26 with revenue and EBITDA beating our estimates by 12.1% and 1.8%, respectively, driven by healthy execution and exports. Margins were impacted by a one-off penalty on delayed Turkey shipments; however, business momentum remained robust with order inflow rising 61% YoY and FY27E revenue guidance raised to Rs 24bn+, implied 30% YoY growth. We remain positive on the company’s positioning within the global AI/data centre power cycle and rising demand for gas engine/turbine-linked generators. Further, the planned entry into larger-capacity generators (~200MW) materially expands its addressable market and could accelerate earnings from FY29E onwards. While we raise our TP to Rs 1,246 (from Rs 875 earlier) on valuation re-rating and rollover, we downgrade the stock to HOLD given limited near-term upside. However, we believe FY29E-based valuation better captures the company’s long-term potential and recommend buy on dips.

Strong quarter despite margin headwinds:

TD Power reported robust Q4FY26 revenue growth of 69.2% YoY to Rs 5.9bn, 12% ahead of estimates, aided by strong execution across export markets. EBITDA grew 49.5% YoY to Rs 979mn, though EBITDA margin declined 219bps YoY to 16.6%, impacted by one-off penalties on delayed Turkey shipments. PAT increased 36.2% YoY to Rs 722mn. For FY26, revenue/EBITDA/PAT grew 45.2%/42.9%/36.8%, respectively, reflecting sustained demand momentum and strong operating leverage.

Order momentum and AI-led demand remain robust:

Q4FY26 order inflow rose 61% YoY to Rs 6.7bn, while FY26 inflow increased 51% YoY to Rs 22.4bn with exports/deemed exports contributing ~80% of total inflows. Order book stood at Rs 19.7bn, with generators accounting for Rs 16.8bn. The management highlighted exceptionally strong demand from gas engines and turbine OEMs driven by AI/data center-related power demand, with customers aggressively expanding capacities through 2030. Further, TD Power’s planned expansion into large-capacity generators for AI/data centers, combined-cycle plants and potential SMR applications significantly enhances long-term growth optionality.

Structural growth drivers strengthen long-term outlook:

We believe TD Power is evolving into a differentiated global generator player benefiting from rising AI/data center power demand, industrial capex and energy transition trends. The company’s technological capabilities, export relationships and entry barriers support premium positioning. While near-term margins may remain exposed to any sharp commodity volatility, the management’s FY27E revenue guidance of Rs 24bn+ remains encouraging. Planned investments in larger capacity generator manufacturing should also materially expand TAM.

Valuation and Rating:

We forecast revenue/EBITDA/PAT CAGR of 27%/28%/27% over FY26-28E and 33%/34%/33% over FY26-29E, the latter reflecting incremental contribution from larger-capacity generator expansion. We value the company at 50.0x Mar’28E EPS and 36.0x Mar’28E EBITDA to arrive at a revised TP of Rs 1,246. Downgrade to HOLD due to limited near-term upside. However, we believe FY29E-based valuation better captures the earnings acceleration potential from the large-generator opportunity, implying materially higher long-term value potential. Key risks: Sharp increase in copper prices and slowdown in global AI/industrial capex.

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

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Analyst:

• Mohit Surana - Senior Research Analyst, Institutional Equities (NISM-202300189881)

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FAQs on TD Power System Ltd. Q4FY26 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.

What drove TD Power Systems’ Q4FY26 performance?

Strong export execution, rising demand from AI-driven data centers, and robust generator orders supported revenue and earnings growth during Q4FY26.

Why is AI demand important for TD Power Systems?

AI infrastructure and hyperscale data centers require large-scale power solutions, increasing demand for gas engine and turbine-linked generators manufactured by TD Power Systems.

What is the significance of the large generator expansion?

The company’s planned entry into large-capacity generators significantly expands its addressable market across AI data centers, industrial power projects, and energy infrastructure.

Why did margins decline in Q4FY26?

Margins were impacted by one-time penalties related to delayed Turkey shipments despite strong operational execution and higher revenue growth.

What are the key risks for TD Power Systems?

Key risks include volatility in copper prices, slowdown in global industrial capex, and weaker-than-expected AI-driven infrastructure spending.