TD Power Systems - Plugged in to the energy transition and AI boom - Initiating Coverage Report

We initiate coverage on TD Power (TDPS) with a Buy rating and TP of Rs 755. India’s mid-sized industrial equipment space is witnessing a renaissance driven by structural trends in decentralized power generation, industrial energy efficiency, and the global shift to renewables and storage-backed systems. Within this landscape, TDPS stands out as a high-quality play in the power conversion value chain with a strong presence in AC generators. The company boasts deep engineering capabilities, robust balance sheet, and delivers best-in-class returns, positioning it as a beneficiary of the energy transition related capex upcycle and AI boom over the next 3–5 years. We expect an attractive revenue and PAT growth of 22-23% for TDPS over FY25-28E.

Strong market position in AC generators:

TDPS is a leading manufacturer of alternating current (AC) generators of less than 60 MW capacity range on an average supplying to OEM turbine makers and EPC contractors globally. The company plays a critical role at the electrical end of the power generation value chain—converting mechanical energy into electrical output—making it integral to multiple generation technologies. The business benefits from strong industry tailwinds such as the expansion of distributed and decentralized power systems, the rise of renewable and waste-to-energy (WtE) projects, growth in industrial captive generation, and the accelerating demand for backup and prime power from data centers and AI-driven digital infrastructure.

Strong export momentum and diversified end-markets:

Exports have become the key growth engine for TDPS. The company derives ~70% of order inflows from exports and deemed exports, with presence across 110 countries. The company’s global OEM partnerships (including leading turbine makers) enable steady repeat business. Sectoral exposure is well-diversified across renewables (biomass, waste-to-energy), industrial CHP, process industries (sugar, cement, chemicals), and data centers.  This diversification across geographies and sectors reduces earnings volatility and enhances visibility of long-term growth.

Technology capability and emerging energy transition play:

The company is investing to align with the next wave of decarbonization and grid transformation. TDPS is expanding into customized generator-motor systems for industrial and renewable applications, backed by a new 0.22 mn sq ft Bengaluru facility (Rs1.2 bn capex) expected to be commissioned by Q3-FY26. The company is thus positioned to benefit from the evolving energy transition and storage ecosystem in India and overseas.

Valuation and view:

TDPS merits premium valuation within the Indian capital goods universe given its strong positioning in the AC generator segment, global competitiveness with low-cost engineering edge, consistent >20% return ratios and robust balance sheet. We value the stock at 40.0x September 2027E EPS and arrive at a Target Price of Rs 755 for TDPS, implied upside 17%. Our bull case valuation indicates an upside of 34%.

Key Risks: 

Further worsening of cash conversion,  and slowdown in global industrial capex in the energy sector.

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

Rating: BUY

CMP: INR 648

Target Price: INR 755

Upside: 17%

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Analyst: 

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