RBS:: Crompton Greaves- Powergrid orders to intensify

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Crompton Greaves
Powergrid orders to intensify
Our discussions with PGCIL indicate that ordering activity is likely to intensify in
the current quarter, as PGCIL targets ordering of Rs150bn in FY11, implying
~Rs70bn of orders in the quarter. New tenders will also have domestic facility
clauses. This is positive for Crompton, which is best positioned in our view.

Powergrid orders to intensify
! Our discussions with Powergrid indicates that ordering activity is expected to intensify in the
current quarter
! To recall, Powergrid had slowed down its ordering in the last couple of quarters due to its
follow on equity offering.
! A good part of the ordering will happen in the higher rating equipments-400kV and above
! PGCIL is targeting ordering to the tune of Rs150bn in FY11. The year to date ordering has
been ~Rs80bn, implying that ~Rs70bn of ordering will be done in the current quarter

! PGCIL is also introducing domestic manufacturing clauses, which imply that an eligible bidder
has to have a JV or subsidiary within six months of the award
! We believe this will give Crompton Greaves an early mover advantage as it qualifies
independently qualifies on the technology side as well as on the manufacturing side.
! Competitors like ABB and Siemens in the past have bid for higher rating equipment like
765kV with equipment from their parent facilities. While they can still tie up with smaller
manufacturers like Emco, Crompton will have the advantage of scale
! This also effectively puts a barrier for the Korean and Chinese vendors like Hyosung and
TBEA, which have bid aggressively in the past to win orders.
! We continue to like Crompton Greaves and have a Buy rating. Stock trades at a price
earnings ratio of 17xFY12F earnings