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Tecpro Systems -------------------------------------------------------------------------------
NOT RATED
Management meeting takeaways
● We met the CFO and CS of Tecpro Systems for an update on
orders and financials. Broadly, management maintained positive
view on BOP ordering and maintained prior guidance for earnings.
● Management highlighted that power segment will continue to
dominate revenues with about 80% stemming from this segment.
Commentary on steel/cement capex recovery in the near term was
not very positive. Management highlighted its view that steel
capex should recover first, later this year followed by cement in 1-
2 years.
● Order book currently stands at Rs42 bn, about 2x at start of the
year. Management remained confident of future wins in BoP EPC
space and highlighted that there are 10-12 state BoP orders and
NTPC bulk tender of Rs40 bn up for bidding in the next 12
months.
● Apart from expansion into water segment, management expects to
build capabilities in coal washery/port handling. Capability in these
new areas will be driven through the inorganic route.
● With 9M results likely in Feb, management guided for Rs1.4/1.8
bn PAT in FY11/12, i.e., a 25% CAGR. Management was
optimistic on maintaining margins and about 20% ROCE. On
consensus estimates, the stock trades at 8.8x FY12 EPS and 2.0x
FY12E book.
Order book stands at Rs42 bn
Management highlighted that its order book stands at Rs42 bn, almost
2x of the Rs21 bn order book at the start of FY11, driven largely by
the Rs19.7 bn order wins at AP genco and Rs3 bn order from NTPC.
Order book comprises of Rs25 bn of BoP orders, Rs12 bn of material
handling orders and Rs5.5 bn of ash handling orders
Order pipeline: Management highlighted that it expects 10-12 BoP
packages from state power generation companies (Maharashtra,
Rajasthan, AP etc.) and NTPC bulk tenders for BoP (for about 8
projects, approx Rs40 bn) to be awarded in the next 12 months.
Power strong; Cement/Steel weak
Management highlighted that about 80% of the revenue comes from
power sector and it expects this to continue for the next 3-4 years.
Management expressed confidence that power sector BoP ordering
should remain strong as the 12th plan orders commence. Commentary
on capex from steel and cement was not very positive with
management expecting weak order patterns to continue for some
more time. Management said that it expects ordering in steel to
recover first, followed by cement in 1-2 yrs.
Performance and growth targets maintained
Tecpro has an EBITDA margin of 14-15% and management
expressed confidence to maintain the margins. For FY11, it expects to
achieve PAT of about Rs1.4 bn (Rs1.1 bn in FY10). It guided for
Rs1.8 bn of PAT for FY12. Net working capital remains about 130
days. Management highlighted that ROCE remains about 20% and it
also uses this criteria for bidding.
Inorganic growth opportunities
Management highlighted that going forward, it might look for inorganic
growth opportunities. Management highlighted that inorganic growth in
water treatment would be most natural followed by acquiring technical
expertise in coal washing/port handling systems that Tecpro currently
lacks.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Tecpro Systems -------------------------------------------------------------------------------
NOT RATED
Management meeting takeaways
● We met the CFO and CS of Tecpro Systems for an update on
orders and financials. Broadly, management maintained positive
view on BOP ordering and maintained prior guidance for earnings.
● Management highlighted that power segment will continue to
dominate revenues with about 80% stemming from this segment.
Commentary on steel/cement capex recovery in the near term was
not very positive. Management highlighted its view that steel
capex should recover first, later this year followed by cement in 1-
2 years.
● Order book currently stands at Rs42 bn, about 2x at start of the
year. Management remained confident of future wins in BoP EPC
space and highlighted that there are 10-12 state BoP orders and
NTPC bulk tender of Rs40 bn up for bidding in the next 12
months.
● Apart from expansion into water segment, management expects to
build capabilities in coal washery/port handling. Capability in these
new areas will be driven through the inorganic route.
● With 9M results likely in Feb, management guided for Rs1.4/1.8
bn PAT in FY11/12, i.e., a 25% CAGR. Management was
optimistic on maintaining margins and about 20% ROCE. On
consensus estimates, the stock trades at 8.8x FY12 EPS and 2.0x
FY12E book.
Order book stands at Rs42 bn
Management highlighted that its order book stands at Rs42 bn, almost
2x of the Rs21 bn order book at the start of FY11, driven largely by
the Rs19.7 bn order wins at AP genco and Rs3 bn order from NTPC.
Order book comprises of Rs25 bn of BoP orders, Rs12 bn of material
handling orders and Rs5.5 bn of ash handling orders
Order pipeline: Management highlighted that it expects 10-12 BoP
packages from state power generation companies (Maharashtra,
Rajasthan, AP etc.) and NTPC bulk tenders for BoP (for about 8
projects, approx Rs40 bn) to be awarded in the next 12 months.
Power strong; Cement/Steel weak
Management highlighted that about 80% of the revenue comes from
power sector and it expects this to continue for the next 3-4 years.
Management expressed confidence that power sector BoP ordering
should remain strong as the 12th plan orders commence. Commentary
on capex from steel and cement was not very positive with
management expecting weak order patterns to continue for some
more time. Management said that it expects ordering in steel to
recover first, followed by cement in 1-2 yrs.
Performance and growth targets maintained
Tecpro has an EBITDA margin of 14-15% and management
expressed confidence to maintain the margins. For FY11, it expects to
achieve PAT of about Rs1.4 bn (Rs1.1 bn in FY10). It guided for
Rs1.8 bn of PAT for FY12. Net working capital remains about 130
days. Management highlighted that ROCE remains about 20% and it
also uses this criteria for bidding.
Inorganic growth opportunities
Management highlighted that going forward, it might look for inorganic
growth opportunities. Management highlighted that inorganic growth in
water treatment would be most natural followed by acquiring technical
expertise in coal washing/port handling systems that Tecpro currently
lacks.
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