Danish Power Ltd

anshul8813 · November 12, 2024, 7:43am

Danish Power Ltd:

About the company:

Danish Power is an ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 certified manufacturer specializing in various types of transformers and electrical control systems. Their product range includes inverter duty transformers for renewable energy projects like solar and wind farms, as well as power and distribution transformers. Additionally, they provide control relay panels and substation automation services.

Product portfolio:
Key products include inverter duty transformers (up to 20 MVA), distribution transformers (up to 5 MVA), and power transformers (up to 63 MVA).

Inverter Duty Transformers (multi-winding) up to 20 MVA 33 kV Class for Solar Plants, Transformers for Wind Turbine Generator
Distribution Transformers up to 5 MVA 33 kV Class
Power Transformers up to 63 MVA 132 kV Class
Panels includes Control Relay Panels up to 400 kV Class, Substation Automation (SCADA), Bus Bar Protection Panels, LT Panels, APFC Panels.

Cold Rolled Grain Oriented (CRGO) Electrical Steel, Copper Wire, Copper Strip, Copper sheet and Aluminium Wire, Strip, Sheet, Mild Steel, Transformer Oil and Relays these are the raw materials required by the company and procures them either through imports or local suppliers.

Manufacturing facility
Manufacturing facility located at Mahindra World City in Jaipur. And company owns a vacant land in here which will used for expansion plans

Danish Power has received the all India First Licence for Outdoor/Indoor type liquid immersed Distribution Transformers up to and including 2500 KVA, 33KV- Part 3 Natural / Synthetic organic ester liquid immersed as per: IS 1180: Part 3: 2021.

Value chain analysis

Raw Material Supply: Involves sourcing core materials like copper, aluminium, silicon steel, and insulating materials.
Core Components Manufacturing: Production of critical components like laminations, cores, windings, and bushings.
Assembly: Integration of components into the final transformer unit.
Testing and Quality Control: Ensures each unit meets safety and operational standards.
Distribution and Sales: Transporting transformers to the market for end-users.
Installation: Setting up the transformer at the desired location.
Maintenance: Includes routine servicing, repairs, and condition monitoring.

Clientele:

Their transformers are designed to ensure efficient power transmission and distribution across several industries, with notable clients like Tata Power, ABB India, and Torrent Power, Waaree Renewable, Jakson Green Private Limited.
Over the years, company has established a diversified client base across different customers in the power industry like renewable power EPC projects like solar power plant, wind power farms, other power generation plants, power transmission, electricity sub-stations, power utilities etc. like Tata Power Solar System Ltd, Waaree Renewable Technologies.

Revenue Mix:

Difference between Power distribution and Inverter duty transformer

Industry overview
• From April 2020 to September 2023, the renewable energy sector in India attracted US$ 6.1 billion in FDI equity investment.
• India has received a cumulative amount of US$ 3.8 billion in foreign direct investment (FDI) in the solar energy sector over the past three fiscal years and the ongoing fiscal year until September 2023.
• India ranked fourth in the list of countries to make significant investments in renewable energy by allotting US$ 77.7 billion between 2015 and 2022
• In the Budget for 2024, the government’s 14 power sector initiatives have been allocated funds that are 50% higher. Increased funds have been allocated to green hydrogen, solar power, and green energy corridors in line with the renewable energy target for 2030.
• In order to meet India’s 500 GW renewable energy target and tackle the annual issue of coal demand supply mismatch, the Ministry of Power has identified 81 thermal units which will replace coal with renewable energy generation by 2026.

CEA: Distribution System Plan 2030
Projected Installed Capacity by March 2030:
• Expected total installed capacity: 786 GW.
• Compared to March 2022: Increase from 400 GW to 786 GW.
• Renewable capacity percentage: Envisaged to be around 62.6% of total installed capacity.

Current Power Sub-Station Statistics (as of March 31, 2022):
• Total number of power sub-stations: 39,965.
• Total installed capacity: 4,82,810 MVA.
Planned Sub-Station Expansion (2022-23 to 2029-30):
• Planned addition of sub-stations: 12,192.
• Total power substation capacity addition: Approximately 1,41,522 MVA.
Projected Cumulative Sub-Station Capacity by 2029-30:
• Cumulative sub-station capacity by 2029-30: Around 6,24,332 MVA.
• Increase compared to March 31, 2022: 29.31%.

National Electricity plan:

The budget outlay for the National Electricity Plan (NEP) for 2023–2032 is ₹9.15 lakh crore.
Planning for Future Demand: The NEP outlines strategies to meet the country’s projected electricity demand over the next 5-15 years, ensuring energy needs align with economic growth.
Renewable Energy Focus: It emphasizes increasing the share of renewables like solar, wind, and biomass to reduce carbon emissions and move towards cleaner energy.
Infrastructure Development: The plan includes proposals for expanding and upgrading the transmission and distribution networks to support reliable power supply and reduce losses.
Energy Efficiency and Security: NEP aims to enhance energy security by reducing dependency on imported fuels and encourages energy efficiency across sectors.
Grid Modernization: Focus on modernizing the power grid with smart technology and digital solutions, including battery storage systems, to handle renewable energy’s variability.
Support for Universal Access: Prioritizes providing electricity access to all households, particularly in rural areas, contributing to socio-economic development.
Five-Year Update Cycle: The NEP is updated every five years to reflect technological advancements, policy changes, and shifting energy demands, keeping it relevant to current needs.

Growth in Transformer Allied products

Transformer Oil market 2028 $3 Billion 5.90%
Oil immersed transformer market 2028 $28.2 Billion 6%
Transformer monitoring market 2028 $3.7 Billion 9.10%
CRGO steel market 2032 $20 Billion 5.90%

Peers capex plans

Growth Triggers
• Diversified Product Base

Company is involved in manufacturing of different types of transformers including inverter duty transformers which are used in renewable power projects like solar power plant or wind farms, oil and dry type power and distribution transformers, control relay panel along with substation automation services.
• Industry Tailwind
Due to increased demand for power projects, need of transformers is increasing rapidly.
India has set Target of 500GW of renewable energy by 2030 which will require substantiable amount Inverter duty transformers.
All the stake holders in the industry have announced aggressive capex plans to cater to the upcoming demand
By 2035 Indias peak power demand is expected to be 1400 GW.
Budget outlay of INR 9.18 lakh crore which will significantly increase the demand for transformers
• Existing relationship with the clients
As company is in B2B business segment they operate in business due to delivery of quality product and timely delivery.
Top 10 clients contribute 87% of the revenue.
Their existing relationship with the clients have helped them to acquire new clients.
• Guidance
Revenue growth of 15-20%
Net profit margin of 11-12%
• Capacity expansion
Increasing capacity from 4681 MVA to 11000MVA which will significantly increase sales.
Aims to improve revenue mix from Power transformers to reduce the share of Inverter duty transformers.
• Experienced Promotors & Management team
Dinesh Talwar, Whole-Time Director, has 39 years of industry experience in transformer and panel manufacturing, while Shivam Talwar, Managing Director, brings 17 years of expertise.
The promoters’ deep industry knowledge has been instrumental in the company’s consistent growth and business expansion.
Shivam Talwar holds a Bachelor of Engineering in Electrical & Electronic Engineering, enhancing the team’s technical and leadership capabilities.

Key Risks
• Reduction in Govt spending in capex could result in lag in revenue recognition.
• Delay in Company’s capex plans could affect the guidance given by the company.

Peer comparison

Assuming Shilchar realization per MVA is 10Lakhs and capacity fully utilized at 7500MVA.
Here Danish power is compared with Shilchar Technologies is because of their similarity in product profile.

Conclusion
Danish Power Ltd. is an attractive investment opportunity in the growing renewable energy and transformer manufacturing sectors in India, especially with the government’s goal of achieving 500 GW of renewable energy by 2030. The company boasts a diverse product portfolio, including inverter duty transformers essential for solar and wind projects, and is expanding its capacity from 4,681 MVA to 11,000 MVA to meet increasing demand. Danish Power is well-positioned for sustained growth with a solid financial performance, established relationships with key clients like Tata Power and ABB India, and a favorable forward price-to-earnings ratio compared to peers. Despite potential risks related to government spending and capital expenditure delays, its proactive strategies and experienced management make it a compelling choice for investors looking to benefit from India’s renewable energy boom.

Disclosure: Invested since IPO levels and Biased

LarryWink · November 12, 2024, 8:30am

Hello Anshul…nice write up

How Danish fare when compared to product range of TARIL or supreme or shilchar ?

Although the sector from surface looks good and there have been lots of report/notes from analysts on the transmission & power sector these days.

They may look they are all in the same league when we compare them based on installed MVA capacity but i think they are different. I feel the the comparison with each of these transformer names based on clients would give crisp picture and it can give more clarity on the growth potential.

Being SME, i doubt, if many data can be collected but it would be nice if data on order book are available like others.

D-Invested at TARIL.

anshul8813 · November 12, 2024, 10:45am

In my view, Danish Power is a comparable peer to Shilchar Technologies, given its significant presence in the inverter duty transformer segment. However, Shilchar stands out due to its stronger focus on exports, which contributes to its higher margin profile. Both companies are at similar capacity levels following their respective expansions.

Regarding the industry, the operating profit margin (OPM) in the ITD sector is generally higher than in the distribution transformer segment, where TARIL operates. Additionally, manufacturing high MVA distribution transformers presents a distinct set of challenges compared to power transformers, further highlighting the differences in the business models.

aastar98 · November 13, 2024, 7:06am

Exposure to Renewable is too much here too from what I understand does the company produces other types of transformers too if yes any idea of revenue split?

anshul8813 · November 13, 2024, 7:43am

deepuji2008 · November 14, 2024, 7:13am

Thanks Anshul for write up, however There is intense competition in the transformer manufacturing industry, with the companies facing strong pressure from both domestic and global players. I am electrical engineer and worked in tata power Delhi for 14 years. I inquired with my ex-colleague in TATA POWER, they said they don’t even know about Danish Power, There are not seen any transform installed in tata power DDL & MUMBAI that is manufactured by Danish Power. Whie revieing steady growth in its top lines for the reported period before IPO, but the sudden boost in bottom lines from pre-IPO periods (FY24 onwards) raises eyebrows.

whipsaw · November 14, 2024, 2:28pm

They have listed “Tata Power Solar Systems” (https://www.tatapowersolar.com/) as their client and not “Tata Power”

akash8844 · November 19, 2024, 5:48pm

Danish Power declared H1FY25 results today and the numbers look solid. Sadly they didn’t publish H1FY24 numbers which could have shown the correct comparative picture here. I hope they come up with a concall or presentation which can throw more light on this.

More than the results, one exciting thing I found is inventory of more than 100 crores in balance sheet.

Now question is how do we see it. The answer lies in the only interview of the management they did before IPO https://youtu.be/wIKuSoOAwsg?t=472 (7:52) wherein Shivam Talwar, MD of the company clearly stating that many of the customers delays the delivery of the transformers due to installation related issues during the monsoon and also due to budgetary allocations, H2 is always bigger for not just Danish but for entire transformers’ industry. Since the demand scenario in the inverter transformer space is out of question, I guess, the big inventory built up is just waiting for dispatch in 2nd half of the FY, which alone will explode the numbers for H2.

Having followed the transformers industry for last couple of years, what I found is Q1<Q2<Q3<Q4. To put this into perspective let us compare half yearly numbers of some listed transformers companies for FY24.

Shilchar H1-173 crores, H2- 223 crores (despite they ran at full capacity for entire year)
Indotech H1-189 cores, H2- 314 crores
TARIL H1-413 crores, H2- 882 crores
Voltamp H1-703 crores, H2- 912 crores

Not just for a year, this is a general trend for last few years. So it looks like the companies in this sector do 60%-70% in 2nd half year.

Now, if we see the results of Danish coupled with strong inventory built up, the numbers look strong.

Danish has installed capacity of 4680 MVA for transformers and if they do 30 crores of revenue from panels (assuming no growth from last year’s revenue), with strong order book (RHP has the order book data) I think the company is on course to do revenue of Rs. 400-425 crores this year which translates to EBITDA of around Rs. 75-80 crores and Net profit of Rs. 55-60 crores for FY25 with existing capacity (not taking into account the capacity expansion which will go live in last quarter).

What lies ahead?

Company has successfully raised 198 crores through IPO for working capital, repayment of loan and capital expenditure. They are expanding their capacity to 8000 MVA.

Civil construction has already began for and machinery is ordered so it can be safe to assume that capex will go live by end of this financial year.

As per EPFO data, number of employees is going up every month, which indicates that hiring has already began for expanded capacity.

With enhanced capacity, Danish Power can do revenue of more than 800 crores (transformers and panels). Even if new capacity runs at optimum utilisation and existing capacity runs at full capacity, company can do revenue of around 700 crores in FY26, which seems to be quite realistic at the moment.

What sets Danish apart:

Management: There is nothing much about the management, but whatever little is available at YouTube, LinkedIn and elsewhere, they are impressive, specially MD Shivam Talwar. The family seems to be domain expert (have a look at listing ceremony https://youtu.be/Oa_voOsrvRE?t=994 )
Geographical presence: Danish is Jaipur based company which has inherent geographical advantage since Rajasthan is the biggest hub of big solar park. The company can deliver the transformers quicker and cheaper.
Working capital management: From the data available, it seems that the management of Danish is efficient is working capital management. Apart from Shilchar, no company comes close to Silchar in working capital management and hence the better margins that the industry peers.

These points make Danish Power an exciting company, however, valuation seems to be stretched at TTM level but if we look at FY26 projections, the company seems to be cheapest in entire transformer space.

Disclaimer: Invested, biased.

anshul8813 · November 21, 2024, 10:42am

This video also helps to understand more about their clients

akash8844 · November 22, 2024, 1:21am

Finally, management has come up with a press release with figures of H1FY24 and other updates

Growth of 45% in revenue of H1FY25 as compared to last year (they are showing 31% in the release which isnt correct calculation)
EBITDA Margins at 19.40% as compared to 17.12% (margins can go up with sales going up)
Capex on track
Orderbook of 390 crores
Finally the biggest one, they have got 1st order from European Market, which means approvals are in place and Danish might be nearer to cracking the export market, if this happens margins can explode post capex.

Management also reiterated that H2 is always much bigger than H1.

Disclaimer: as earlier

akash8844 · December 6, 2024, 9:16am

Rajasthan has unveiled its Integrated Clean Energy Policy, 2024, with an ambitious target of achieving 125,000 MW of renewable energy capacity by the financial year 2030. The plan includes installing a capacity of 90,000 MW of solar power, 25,000 MW of wind and hybrid energy, and 10,000 MW of hydro, pumped storage, and battery energy storage systems

Soham_Kunkulol · December 7, 2024, 5:53am

Anyone knows any listed competitor in this transformer sector?

nishant_ram · December 10, 2024, 5:01am

Shilchar Technologies

Marathondreams · December 10, 2024, 7:35am

Transformers and Rectifiers India Ltd is one of old and large player in transformer sector. Also CG power has large capabilities in transformers under its power systems division.

akash8844 · December 15, 2024, 5:06am

yaassh · December 16, 2024, 10:12am

any idea for value of this order? any estimates

chintanrokad · December 17, 2024, 4:46am

Don’t know the exact value for the order. But i tried to guesstimate using AI.

To determine the required inverter duty transformer capacity for a 1 GW solar park, several factors must be considered, including the inverter output capacity and the power factor.

Inverter Capacity and Transformer Sizing

Inverter Output: For a 1 GW solar power plant, the inverters would typically need to handle a total output of 1,000 MW (or 1,000,000 kW). The inverters are usually rated at unity power factor, meaning the transformer should also be rated accordingly. Therefore, if the inverter capacity is 1,000 MW, the transformer should ideally be rated at 1,000 MVA to match this output without derating.
Power Factor Consideration: While transformers are sometimes rated with a power factor of 0.8 (which would increase the required transformer capacity to about 1,250 MVA), it is generally more efficient to size transformers based on unity power factor for solar applications. This means that for a 1 GW solar park, a transformer rated at 1,000 MVA is appropriate if designed for unity power factor operation[source link]
Overload Capacity: It is advisable to consider potential overload situations. Some recommendations suggest sizing the transformer with an additional margin (e.g., up to 12% more than the nominal rating) to accommodate fluctuations in load and ensure reliability during peak generation periods
source link
. Thus, a transformer rated around 1,120 MVA could be considered for added safety against overloads.

Nabendu · December 17, 2024, 4:54am

The requirement is on point with what I read from some of the tenders however in the Solar AMA there was a mention that for 100 MV project it require 200 to 300 MVA transformers ( Imo it was meant to be read as all transformers including power transformers and not only IDT ) .

The average realization for inverter duty transformers is 6 lacs per MVA over the last 3 years ( Refer DRHP of Danish ) so oveall it appears to be a 70 Cr order +/- 5 crs .

@DEBASHISH you calculations were not far away

One more thing to note is daily morning the stock is buzzing with activity . While we are no one to predict the wild swings but is there something more to it that we currently know in public domain which is driving the prices

yaassh · December 19, 2024, 3:42pm

the volatile nature without much volumes only a risk, from the day it removed from circuit, my feel is that some operators might churning it daily and elimininating weak holders and keeping counter steady but I feel fresh entry in this prices is risky, may be I am little scared about its daily trading range, valuations are okayish if we hold for LT

ganesh_bastwadkar · December 19, 2024, 6:05pm

Look at the capacity addition and its operational period/ I.e new capacity starting to operate.
Hopefully the momentum should continue. Especially with the demand from renewable sector going to grow exponentially.
Disc: holding small qty