3 Lesser-Known Smart Meter Stocks for this Record-High Booming Market

The way Indian share market has performed in the past few months, the entire world believes the country has supposedly entered a phase of perpetual growth.

Benchmark index Nifty has hit an all-time high for more than six times this year already.

Whether this is driven by Modi's infra push or because of artificial intelligence aspects picking up, the result of it is easy to tell... and no wonder bulk load of foreign money is coming to India.

One industry that we believe could attract a lot of renewed interest from foreign investors is the smart metering industry.

A smart meter is basically an advanced electronic device designed to record crucial information related to electric energy consumption, such as voltage levels, current, and power factor.

What's happening right now is every order win for a company towards the smart meter segment is rewarded with an upper circuit.

While most of the community is gung-ho on the bigger plays like Tata Power and Genus Power, we believe smaller companies could also make hay while the sun is still shining.

Keeping that in mind, here are three such lesser-known smart meter stocks in India.

#1 India Power Corporation

With a market cap of Rs 22 billion (bn), India Power Corporation (IPC) is among the top 10 power distribution companies in India.

It's one of the early adopters of digital transformation in the utility sector. India Power Corporation has adopted smart meter solutions with consumers, IoT devices in its distribution transformers, and even 3-phase smart meters in its grid.

It also generates power in the thermal, wind as well as solar segments.

One of its biggest contracts includes implementing 350,000 smart meters in five towns of Madhya Pradesh.

Since the company's core revenue comes from the power distribution business, it has been maintaining high operational efficiencies.

The stock price has shot up due to smart metering theme picking up and also because some of the litigations it was facing have been ruled in the company's favor.

What's concerning though is that promoters have pledged most of their holding, which many investors consider as a red flag.

The company does have some things working in its favour though. It has reduced debt in the previous financial year while it has posted steady growth in recent quarters.

Declining power purchase costs and consistent addition of new customers are the two factors working for the company.

Going forward, the company is hoping for strategies acquisitions of utilities and roll out more smart meters in the next 5-6 years.

#2 Kaynes Technology

Next on this list is Kaynes Technology, a relatively bigger company but lesser-knows for its efforts towards smart metering.

Kaynes Technology is known for its end-to-end and IoT solutions-enabled integrated electronics manufacturing. Basically, printed circuit board is its core product, contributing to most of its revenue.

But what many don't know is that it also manufactures smart energy meters.

It has pivoted to high-margin areas in recent years and makes smart energy meters, streetlight controllers, air data sensors, thermal imaging systems, etc.

The company currently enjoys the highest margins among its peers. And the strong performance has trickled down to returns.

The company has a market cap exceeding Rs 180 bn.

Note that Kaynes Technology is in the process of establishing a semiconductor OSAT (outsourced semiconductor assembly and test) manufacturing and compound semiconductor facility in Telangana.

With an investment of Rs 28 bn, the facility is set to occupy a 40-acre plot in the Ranga Reddy district of Telangana.

Looking beyond the smart meters domain, Kaynes Technology India is poised for substantial growth by reinforcing its footprint in the aerospace and semiconductor industry.

The company's substantial order book, valued at more than Rs 30 bn, will be executed over the next 18-20 months, indicating promising revenue trajectory.

#3 Techno Electric & Engineering

The last stock on this list with market cap exceeding Rs 87 bn is Techno Electric & Engineering.

Techno Electric & Engineering is engaged in providing EPC, asset ownership and operations and maintenance services in the power infrastructure industry.

It specializes in rural electrification via the RGGVY program, smart metering infrastructure, and STATCOM devices for reactive power.

Earlier, the company had an order to install 2 lakh smart meters of Rs 2 bn in Jammu & Kashmir.

But the latest order just made its growth prospects wide open. Last month, Techno Electric secured new orders worth Rs 17.5 bn for smart metering and transmission projects.

No wonder shares have shot up in the past one month.

As of November 2023, it had an unexecuted order book worth Rs 44 bn, which has gone up post the recent order wins.

The company is expecting more orders worth Rs 40 bn in the coming quarters.

Techno Electric is all set to report its Q3 earnings on 13 February 2024. In the previous quarter, the company posted the highest revenue in as many as three years while net profit for the quarter was also the highest in past seven quarters.

Foreign investors have found quite a liking to this smart meter stock as they have repeatedly added stake for the past eight quarters.

In Conclusion

So these were some of the relatively lesser known stocks from the smart metering industry.

You can also take a look at the detailed editorial we covered in September 2023 which has a list of 9 smart meter stocks.

Please note, we're not making any recommendations throughout this article. The idea is to keep a watch on these companies and see how they're progression on the smart metering front.

A good way to select stocks is to look for these parameters:

• Stocks with nil or no promoter pledging
• High promoter stake (preferably above 45%)
• Low debt to equity (preferably below 0.8 times)
• High ROE and ROCE (preferably above 15%)
• Low cash conversion cycle (below 100 preferably) and low receivable days (preferably below 90).
• And of course, also look for consistency in operating profit margins.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation serviceshere...