The transformer factory
Demand for transformers is surging in domestic and global markets, especially that for power transformers. As a result, transformer manufacturers are expanding their manufacturing footprint. India’s leading transformers have been increasing their capacity by threefold over FY26-28E (details inside). Thus, demand for specialised conductors, which form the core of transformers, is accelerating. However, supply is limited due to manufacturing complexity and an elongated approval process. KSH International (KSH) is a leading supplier of transformer conductors to Indian and global majors. It is doubling capacity to 59kt to meet the increase in demand. We estimate volume/EBITDA/earnings CAGR of 24%/ 36%/ 43% over FY25-28E. At CMP, the stock is trading at ~12x FY28E earnings, at a 40% discount to peers. Initiate coverage with BUY.
Surging demand
Demand for high-voltage transformers is rising. We believe demand for inter-state and HVDC transformers could grow, going forward. Almost all the manufacturers are expanding their capacity. We estimate a threefold rise in transformer capacity, leading to a surge in demand for these premium conductors.
A host of entry barriers
The market is characterised by higher manufacturing complexity and higher entry barriers. Therefore, only a few competitors exist in this market. KSH remains one of the leading players in high voltages and the only Indian supplier to be approved for HVDC transformers. It has received orders for HVDC.
An incumbent driving the home advantage
KSH had 19kt capacity in FY25 for meeting demand for transformers. Further, it has recently commissioned ~7kt capacity (~11kt under construction). It is also expanding capacity in round wires to ~22kt.
The debut of a global peer: Asta – a case study
Asta Energy Solutions AG (ASTAG), a global manufacturer of specialised conductor for transformers, has raised EUR 125mn through IPO, primarily to fund expansion across its facilities across Europe, South America and Asia. ASTAG’s EBITDA saw a 43% CAGR between CY22–25 and its order book swelled 6x in 3.5 years. The stock was up 46% on its listing and is trading at 29x CY25 earnings.
Initiate coverage with BUY; TP at INR 600
We initiate coverage with BUY at a TP of INR 600 (20x FY28E earnings).
