GE Targets Double Digit Revenue Growth in Africa

General Electric (NYSE:GE) is looking to monetize heavy equipment and power projects sprouting up in Africa. With growth in GDP, the African region has started to develop a healthy appetite for power and infrastructure, both of which require heavy equipment that GE supplies. A majority of the company’s African revenue comes from South Africa and oil rich countries of Nigeria and Angola, where it supplies oil and gas equipment.

GE’s growth strategy is to expand from these three countries to other small, faster-growing geographies where the demand is increasing. It is specifically targeting frontier markets of Ethiopia, Cameroon, Zambia and Mozambique where it sees long-term growth opportunities. The company has appointed a number of regional executives who will focus on growing the business in northern and sub-Saharan regions of Africa and delivering projects related to cleaner energy & water and affordable healthcare. ^[1]

GE competes with industrial conglomerates such as United Technologies Corporation (NYSE:UTX) and 3M (NYSE:MMM), among others. We currently have a price estimate of $20 for GE, which is slightly above the current market price.

See our full analysis of the General Electric stock here

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General Electric’s Africa operations currently account for just 1% of the company’s overall revenues. The company hopes to record a double digit growth both in terms of revenues and the number of orders from the continent over the next three to five years.

It recently signed an agreement with the Nigerian government to help develop the country’s power grid after the government privatizes the sector. Nigeria is looking to create 10 GigaWatt of additional capacity in the next five years. GE will invest $10 billion in these new power plants for a 10-15% equity stake. The company also secured an order of 43 locomotives from South Africa’s railway engineering firm Transnet Group, which is in the midst of a fleet renewal program. Apart from these two big orders, GE also has a number of small orders that will help boost its revenue in the short term.

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1. GE sees double digit revenue growth in Africa, Business Day, 11 May – 2012 [↩]