Schneider Electric (SU) Faces 5% Lower Circuit for Fourth Consecutive Day: Multibagger Stock Under Pressure

• Schneider Electric Infrastructure, a prominent player in the heavy electric equipment industry, has seen its shares hit the 5% lower circuit limit for the fourth consecutive day on Wednesday.
• The shares have fallen from ₹916 apiece to the current level of ₹746.30, marking an 18.52% decline.
• This recent drop has also led the stock to correct 22% from its recent all-time high of ₹954.35. The downturn followed the company’s Q4 earnings, which failed to meet market expectations.

Schneider Electric Infrastructure’s shares have plunged 22% from their recent high, driven by disappointing Q4 earnings and rising operational costs.

Q4 Earnings Miss Market Expectations

The company’s March quarter numbers revealed a significant 92.7% decline in net profit to ₹3.28 crore, primarily due to a sharp increase in operating expenses, which rose to ₹398.54 crore from ₹349.55 crore in Q4 FY23. This earnings miss has been a critical factor in the recent sell-off.

Operational and Financial Challenges

Additionally, finance costs jumped to ₹32.38 crore from ₹14.34 crore in Q4 FY23. Despite these challenges, revenue from operations for the quarter increased by 15% YoY, reaching ₹471.75 crore from ₹410.51 crore. The company’s net profit for the full fiscal year (FY24) improved to ₹172 crore from ₹124 crore in FY23, while revenue from operations rose to ₹2,207 crore from ₹1,777 crore, according to the company’s Q4 investor presentation.

Brokerage Outlook

Earlier, global brokerage firm Goldman Sachs maintained a cautious outlook on the stock, citing the sharp rise in share value in recent years. The brokerage initiated a ‘Sell’ rating on the stock, setting a 12-month target price of ₹470 apiece, due to perceived expensive valuations. However, the brokerage remains optimistic about the company’s future prospects, believing it will benefit significantly from the Indian government’s Revamped Distribution System Scheme (RDSS), which is part of power distribution sector reforms.

Future Prospects and Government Initiatives

With expectations of driving a US$37 billion capital expenditure (capex) in distribution system expansion and strengthening over the next five years, the RDSS holds immense potential. Currently, projects worth US$14 billion have been sanctioned under the scheme, the brokerage said.

Conclusion

Despite the recent sell-off and operational challenges, Schneider Electric Infrastructure’s long-term prospects remain promising, supported by government initiatives and robust revenue growth. Investors should monitor the company’s performance closely, especially in light of the RDSS and other strategic developments.