Schneider Electric stock hits 5% lower circuit for 4th day in a row, down 22% from recent high – here’s why

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. During this period, 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.

Despite the recent sell-off, the stock boasts a multibagger return of 215% in the past year and an impressive 611% over the last five years, showcasing its consistent performance.

The company on May 23 released its March quarter numbers, reporting a 92.7% decline in the 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.

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Additionally, finance costs jumped to ₹32.38 crore from ₹14.34 crore in Q4 FY23. Revenue from operations for the quarter increased by 15% YoY, reaching ₹471.75 crore from ₹410.51 crore.

Despite the quarterly setback, 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.

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.

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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.

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.

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Meanwhile, over the weekend, Capgemini and Schneider Electric announced a new collaboration focused on energy optimisation.

Schneider Electric, headquartered in India, specialises in power distribution, manufacturing, designing, and servicing advanced products and systems for electricity distribution. These include distribution transformers, medium voltage switchgear, protection relays, and various electricity distribution and automation equipment.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.