India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
ENGINEERING & CAPITAL GOODS
Strong revenue growth: Q3FY11 Result Preview: Edelweiss
Key highlights of the sector during the quarter
Tendering activity has been strong, particularly in power and railways space, while
it has been muted in oil & gas and roads. Also, there was a strong negative
sentiment owing to mega order awards for power equipments to foreign players.
However, certain bid norm changes in the T&D industry for PGCIL and NTPC
tenders is likely to be positive for domestic T&D entities like Crompton, Areva T&D
etc.
Result expectations for the sector and stocks under coverage
We expect the sector’s revenues to jump 20% Y-o-Y, led by 28% Y-o-Y growth in
BHEL and 24% Y-o-Y growth for Larsen & Toubro (L&T). Apart from large caps,
we also expect strong revenue growth in Thermax, Cummins India and BGR
Energy (BGR) in 3QFY11. We expect a 15% Y-o-Y growth in sector PAT, largely on
back of healthy execution during the quarter. Unlike H1FY11, we expect sector
OPMs to remain largely flattish Y-o-Y with input cost benefits largely over for
BHEL. While L&T could report a decent new order growth in 3QFY11, we expect
Q4FY11 to be strong for BHEL in terms of new business flow.
Outlook over the next 12 months
A large number of tenders in the power and railways space indicate a strong
ordering traction over the next few months. While NTPC’s bulk tender for 14,460
MW is expected to be awarded in the next few months benefiting companies in
the domestic space, major awards by PGCIL should be beneficial for companies in
T&D equipment and T&D EPC space. We particularly expect T&D equipment
companies to post strong performance in terms of earnings quality and execution,
as operations normalise for a few MNC equipment companies, which will further
be complemented by reducing intensity of competition from Korean and Chinese
players due to bid norm changes by PGCIL.
Top Picks: BHEL, Crompton Greaves, Thermax, Cummins India, KEC
International.
No comments:
Post a Comment