Motilal Oswal has maintained a 'Buy' rating on Atlanta Electricals, setting a target price of Rs 1,980. The company faces short-term pressure from rising costs and weather-related delays, but analysts expect a recovery in the second half of fiscal 2027. Investors are monitoring the firm's move to develop 765kV transformer technology in-house after external partnership talks stalled.
Motilal Oswal has maintained a positive outlook on Atlanta Electricals, setting a target price of Rs 1,980. The brokerage firm's updated target follows a fiscal second-quarter performance where the company showed revenue growth despite dealing with significant operational hurdles.
In the second quarter of fiscal 2027, Atlanta Electricals reported revenue of Rs 390.1 crore, marking a 23.1% increase compared to the previous year. Profit after tax also grew, reaching Rs 32.1 crore, which is a 28% increase year-on-year. While these headline numbers show growth, the company faced margin pressure during the period. The EBITDA margin dropped by 201 basis points to 15.3%, primarily due to higher raw material costs and increased expenses.
Operational delays were a key theme during the quarter, with heavy monsoon rainfall hindering project execution. This weather-related disruption led to approximately Rs 180 crore in deferred client deliveries. Analysts expect that these issues may be temporary, with a potential rebound in execution efficiency and order inflows projected for the second half of the 2027 fiscal year.
A significant strategic change involves the company’s 765kV transformer facility. After discussions for an external technology partnership failed to produce an agreement, Atlanta Electricals has decided to develop the necessary technology in-house. While this move helps the company maintain control over its intellectual property, it introduces uncertainty regarding the timeline for production and ramp-up for these higher-value transformers. Investors should track whether this shift causes further delays in the ordering process.
Contrasting with the 765kV uncertainty, the company’s 400kV facility testing remains on schedule. The short-circuit testing for this facility is expected to be completed in December 2026, which acts as a near-term milestone for the business.
Regarding valuation, the target price of Rs 1,980 is based on a 32x multiple on two-year forward earnings. The stock currently trades at a 40% to 45% discount compared to industry peers that are already active in the 765kV transformer market. This valuation gap reflects the market's caution regarding the company's ongoing execution delays and the shift to in-house technology development. Moving forward, the key monitorables for shareholders include the progress of the 400kV testing, the timeline for the 765kV transformer ramp-up, and the company's ability to protect profit margins against raw material price fluctuations.