• Execution disappointments in Sep-q may brew disbelief in the promise
of a 2H recovery, especially for L&T, where topline growth expectation
has already been tempered down by management (JPMe 9% growth).
Implied 2H revenue growth est. is 32%, already challenging. Order inflow
expectation of Rs180-200B in Sep-q looks achievable if L&T books captive
development projects too. BHEL appears more likely to meet/exceed
high growth expectations in our view: Enhanced capacity of 15GW and
comfort of order book offers economies of scale and confidence in Sep-q
revenue and PAT growth est. of 22.5% and 27.7% respectively. Reported
order inflows of Rs89B are a tad low, but realizations are still intact.
• Weak Sep-q for Suzlon: Owing to weak volumes combined with sticky
fixed costs, we est. an EBITDA loss of Rs1.46B and PAT loss of Rs4B.
Reported inflows from India (~309MW) in Sep-q lend confidence to
1000MW domestic sales est. in FY12, but famine of overseas orders
continues (except a ~50MW order from China) which puts FY12 overseas
sales est. of 1050MW at risk.
• Potential upside to full year est. for CG, if it maintains 14% margins
despite 25-40% YoY hike in transformer input commodity prices, and
delivers 9%+ topline growth despite 13% YoY INR appreciation vs. Euro.
• We expect ~20% YoY dip in Punj Lloyd revenues in Sep-q, mainly on
account of sharp decline in pipeline segment revenues and weak pick up of
revenue booking in long gestation infra projects (Libya, 38% of OB).
• MNC T&D plays: Siemens expected to maintain execution momentum
from last quarter, with margin improvement on low base; JPMe healthy PAT
growth. Near term pain in ABB expected to continue, expect PAT dip of
8.6%YoY (link to recent ABB report) in Sep-q.
• Stock views in light of Sep-q results: On relative basis we prefer to play
BHEL (OW) over L&T (OW), latter is trading at a 18% P/E premium, with
higher risk to near-term growth in our view. We are sellers of Suzlon (UW)
and cautious on Punj Lloyd (N). We have no absolute buy in T&D, but
continue to prefer CG (N), over Siemens (N) over ABB (UW).
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