Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DIAMOND POWER INFRASTRUCTURE LTD
RECOMMENDATION: BUY
TARGET PRICE: RS.319
FY12E P/E: 4.5X
q Numbers are ahead of expectations on the revenue as well as profit
front. Revenue growth has been mainly driven by the Conductors and
Cables segment. The cables business has grown on account of commissioning
of HT cables facility in Q4 FY10. Lower tax outgo also contributed
to the variance between our estimates and actual numbers.
q The company has recently commissioned its transmission towers plant
and expects to complete its EHV cables plant in current fiscal. The company
has been qualified for bidding for PGCIL orders recently.
q The stock is trading at very attractive valuations. We maintain BUY with
a target price of Rs319.
Result Highlights
n Revenue grew 80.3% yoy mainly driven by the Conductors and Power Cables
segment.
n DPIL has raised its LT cables capacity from 8800 kms to 33000 kms and HT
cables capacity from 2800 kms to 5600 kms in Q4 FY10. The ramping up of the
expanded capacity is driving revenues for the Cables segment.
n Conductor revenue posted strong growth in the quarter, aided by higher copper
prices.
n The EPC business has grown 25% on a yoy basis, but is lower on a qoq basis.
This segment tends to be lumpy across the quarters.
n We understand that PGCIL has again started expediting releasing of orders recently,
which should drive order intake for conductor manufacturers like DPIL.
DPIL has recently become qualified for bidding for PGCIL orders which is another
important milestone for the company.
Maintained margins at healthy level despite material price inflation
n EBITDA margins for the quarter declined marginally on a yoy basis. Recovery of
margins in transformer segment on sequential basis came as a surprise given the
margin woes that the industry is facing.
n The company managed to secure healthy margins in conductor segment on account
of its focus on distribution conductors. Competitors (Apar as well as Sterlite
Tech) have reported severe margin erosion in conductors in Q3 FY11.
n Employee costs rose sharply during the quarter on account of addition of 113
employees for its expansion projects.
Lower tax rate boosts profit growth
For the quarter, the company reported tax rate of 25% against 35% in Q3 FY10.
The management clarified that during the quarter the company booked Rs 200 mn
revenue from Apex Transformers, the profits on which were tax exempt. At full tax
rate, the profits would have been lower by Rs 35 mn.
Capital employed down on sequential basis
Capital employed has increased on yoy basis on account of increase in volume of
work. Increase in material prices (Copper and Aluminum) has also increased the inventory
cost substantially. On the positive side, capital employed has declined on a
qoq.
Order book position is healthy
n At the end of December 2010, Order book position stood at Rs 15 bn down from
Rs 17 bn at the end of Q2 FY11.
n Order book provides revenue visibility of 13 months based on trailing four quarters.
n The company has secured orders worth Rs 14 bn in 9M FY11 and has bid for Rs
35 bn orders. The company expects to win Rs 2.5-3.0 bn of orders in current
quarter.
n The company indicated that its focus remains on maintaining margins and intends
to take a cautious approach in building order book. This is in view of deteriorating
payment terms and pricing pressure in electrical equipments.
Other developments
n During the quarter, the company commissioned its 50000 tpa transmission towers
plant at its existing location. Commercial production is expected shortly.
n The EHV cables plant is expected to be commissioned by March 2011.
n The company replaced Rs 1.3 bn high cost borrowings from Axis Bank with a
term loan from ICICI Bank at competitive rate, which is expected to bring borrowing
cost down.
Valuation and Recommendation
n DPIL is trading at 5.3x and 4.5x FY11 and FY12 earnings respectively. On an
FY11 EV/EBITDA basis, the stock is trading at 4.1x.
n We maintain BUY on DPIL with an unchanged price target of Rs 319.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DIAMOND POWER INFRASTRUCTURE LTD
RECOMMENDATION: BUY
TARGET PRICE: RS.319
FY12E P/E: 4.5X
q Numbers are ahead of expectations on the revenue as well as profit
front. Revenue growth has been mainly driven by the Conductors and
Cables segment. The cables business has grown on account of commissioning
of HT cables facility in Q4 FY10. Lower tax outgo also contributed
to the variance between our estimates and actual numbers.
q The company has recently commissioned its transmission towers plant
and expects to complete its EHV cables plant in current fiscal. The company
has been qualified for bidding for PGCIL orders recently.
q The stock is trading at very attractive valuations. We maintain BUY with
a target price of Rs319.
Result Highlights
n Revenue grew 80.3% yoy mainly driven by the Conductors and Power Cables
segment.
n DPIL has raised its LT cables capacity from 8800 kms to 33000 kms and HT
cables capacity from 2800 kms to 5600 kms in Q4 FY10. The ramping up of the
expanded capacity is driving revenues for the Cables segment.
n Conductor revenue posted strong growth in the quarter, aided by higher copper
prices.
n The EPC business has grown 25% on a yoy basis, but is lower on a qoq basis.
This segment tends to be lumpy across the quarters.
n We understand that PGCIL has again started expediting releasing of orders recently,
which should drive order intake for conductor manufacturers like DPIL.
DPIL has recently become qualified for bidding for PGCIL orders which is another
important milestone for the company.
Maintained margins at healthy level despite material price inflation
n EBITDA margins for the quarter declined marginally on a yoy basis. Recovery of
margins in transformer segment on sequential basis came as a surprise given the
margin woes that the industry is facing.
n The company managed to secure healthy margins in conductor segment on account
of its focus on distribution conductors. Competitors (Apar as well as Sterlite
Tech) have reported severe margin erosion in conductors in Q3 FY11.
n Employee costs rose sharply during the quarter on account of addition of 113
employees for its expansion projects.
Lower tax rate boosts profit growth
For the quarter, the company reported tax rate of 25% against 35% in Q3 FY10.
The management clarified that during the quarter the company booked Rs 200 mn
revenue from Apex Transformers, the profits on which were tax exempt. At full tax
rate, the profits would have been lower by Rs 35 mn.
Capital employed down on sequential basis
Capital employed has increased on yoy basis on account of increase in volume of
work. Increase in material prices (Copper and Aluminum) has also increased the inventory
cost substantially. On the positive side, capital employed has declined on a
qoq.
Order book position is healthy
n At the end of December 2010, Order book position stood at Rs 15 bn down from
Rs 17 bn at the end of Q2 FY11.
n Order book provides revenue visibility of 13 months based on trailing four quarters.
n The company has secured orders worth Rs 14 bn in 9M FY11 and has bid for Rs
35 bn orders. The company expects to win Rs 2.5-3.0 bn of orders in current
quarter.
n The company indicated that its focus remains on maintaining margins and intends
to take a cautious approach in building order book. This is in view of deteriorating
payment terms and pricing pressure in electrical equipments.
Other developments
n During the quarter, the company commissioned its 50000 tpa transmission towers
plant at its existing location. Commercial production is expected shortly.
n The EHV cables plant is expected to be commissioned by March 2011.
n The company replaced Rs 1.3 bn high cost borrowings from Axis Bank with a
term loan from ICICI Bank at competitive rate, which is expected to bring borrowing
cost down.
Valuation and Recommendation
n DPIL is trading at 5.3x and 4.5x FY11 and FY12 earnings respectively. On an
FY11 EV/EBITDA basis, the stock is trading at 4.1x.
n We maintain BUY on DPIL with an unchanged price target of Rs 319.
No comments:
Post a Comment