BGR Energy Striding into the big league; maintain Buy: Anand Rathi

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


BGR Energy
Striding into the big league; maintain Buy
BGR Energy’s strong execution skills, enhanced capabilities
and robust order pipeline would lead to high growth in FY11-
12. The company is well positioned to tap opportunities in the
power generation sector offered in the XII FYP & beyond.

 Entering the big league. BGR is perched for a major role in
the XII FYP & beyond, with its BTG (boiler, turbine, and
generator) manufacturing facility and strong expertise in balance
of plant (BoP). Qualified for the NTPC bulk tender, a healthy
clientele of various state electricity boards (SEBs) and
indigenous manufacturing facilities in JV with Hitachi to be
operational by end-FY13 would place BGR in the big league.
 Strong pipeline to support growth. Unexecuted order book
of `105bn, which is 3.4x FY10 sales, assures FY11-12 revenues.
Management has guided for a strong FY11e order pipeline of
`12-15bn. Current order book would be adequate to support
50% yoy growth in FY11-12e.
 Execution concerns assuaged. The strong revenue growth
indicates that execution is ongoing as per schedule. We expect
FY10-13e sales and net profit CAGR of 39% each and
stabilized margin of ~11% on new projects that have a price
variation clause (PVC).
 Valuation and risks. We value BGR Energy at `937 based on
15x FY12e EPS. Our target PE is at ~20% discount to our PE
for BHEL. Risks: slower execution; fewer orders.