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Petron Engineering – Management meet update
We met the Managing Director of Petron Engineering and the key takeaways of the meeting are
n Order backlog has grown significantly- order backlog as on November 2010 stood at Rs17 bn versus Rs10 bn in June 2010. This translates into visibility of 3X FY10 revenues.
n Order backlog is dominated by Oil & Gas at 60% followed by Power at 30%.
n Outstanding tenders awaiting finalization stood at Rs30bn. Considering 20% strike rate, promises further order inflows worth Rs7-8 bn in next 6-9 months.
n Satisfactory progress and execution in large orders - especially Rs4.0 bn EPC order from Paradip refinery.
n Kaztroy Group (Promoters of Petron Engineering) has made good progress on Indian soils. In 3 years of operations in India, Kaztroy Group (includes Kaztroy India, Petron Engineering & Petron Civil) has achieved revenues of Rs20 bn and order backlog of Rs50 bn.
n Kaztroy Group current progress in India, would benefit Petron Engineering - in terms of joint bidding in few projects, sub-contracting jobs, etc.
n To maintain growth momentum Petron Engineering is eyeing EPC jobs in Fertilizer, Cement and BOP. This would be a break-away from preference or psyche for labor jobs.
n No change in guidance- expects revenues of Rs6.0 bn in FY11E and Rs8.0 bn in FY12E. Reiterated 11% EBIDTA margins in FY11E and FY12E.
n Rough-cut earnings estimates are Rs48.8/Share and Rs64.8/Share in FY11E and FY12E. At CMP of 350/Share, Petron Engineering is trading at 7X FY11E and 5X FY12E earnings.
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