Top takeaways from Q1FY17 : Alstom T&D’s (ATD) loss of Rs 176mn (vs Rs 102mn profit in 1Q16) was materially below our and consensus estimates of profit. Results were below estimates due to weak margins and high interest expenses.On reported basis losses were even higher at Rs 1.97bn on account of provisions for doubtful debts and tax disputes. These provisions were over and above IND?AS impact. In our view change in management (from Alstom to GE) led to these provisions. The pricing for power?transmission equipment, especially transformers and GIS, continues to remain under pressure due to intense competition from foreign manufacturers and further added by reverse auction process adopted by some utilities.Despite the weak market, order inflows grew 12% yoy to Rs 8bn led by government orders for transformers, reactors, GIS and AIS of 220?765kV range.

Outlook and valuation: ATD is still in the integration phase with GE, resulting in higher volatility in margins. Visibility on order inflows also remains low on weak T&D ordering in FY17?18 coupled with loss of opportunity in 765 KV GIS, HVDC and STATCOM orders. They cut their FY17/18 EPS estimate by 28/6% to factor in lower revenues and margins. Maintain Neutral rating with a revised target price of Rs 335 (earlier Rs 375). The stock currently trades at 43x FY18 EPS.