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» PGCIL orders have seen a sharp pick-up in the last few months (Dec-Feb
2011 orders account for 58% of ordering YTD) and we expect the traction in
orders to continue into March; competitive intensity remains high across all
segments, especially in transmission lines and towers.
» Orders at Rs 82.7bn were down 4% in the period Apr-Feb 2011; transformer
orders see the sharpest fall with orders down 72% YoY and substation
orders dropping 29% YoY. Transmission line orders saw a jump of 53% and
conductor orders are up by 43%.
» Crompton Greaves and BHEL remain our top picks in the sector; we
maintain our SELL rating on ABB India.
Orders gain traction over the last few months
There have been concerns on the street with regard to a slowdown in ordering
from PGCIL over the past year. However, there has been a sharp pick-up in
ordering over the last 3 months (Dec-Feb 2011 orders account for 58% of
ordering); orders placed by PGCIL between April-Feb 2011 now stand at Rs
82.7bn (down 4% YoY). Transformer orders have seen the sharpest fall with
orders being hit on change in pre-qualification norms, in our view. We expect
PGCIL orders to pick up further in March, which historically sees the highest
amount of ordering. For FY11, we would expect orders to be flat to marginally
positive compared to last year’s order flow of INR119bn.
Competitive intensity remains high
There is no let up in competition across segments. Within transformers, the
Chinese (TBEA Shenyang and Baoding) have not been able to win any orders
in FY11; however, Hyosung increased its share to 27% at the expense of
Crompton Greaves. Within substations, the Indian MNCs (ABB, Areva and
Siemens) have managed to recapture 50% share (38% share in FY10), which
could indicate the first signs of consolidation in this segment. Within
transmission lines, KEC International along with Tata Projects, SPIC and EMC
garnered 70% of the orders; Jyoti Structures and L&T have not received any
orders from PGCIL in FY11.
Valuation and picks
The sector has seen a sharp de-rating over the last few months on a slowdown
in ordering along with macro concerns on rising commodity prices and interest
rates. Resumption in ordering from PGCIL may be the first signs of a reversal
in this trend. Our top picks in the sector remain Crompton Greaves and BHEL,
while we maintain a SELL rating on ABB India.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
» PGCIL orders have seen a sharp pick-up in the last few months (Dec-Feb
2011 orders account for 58% of ordering YTD) and we expect the traction in
orders to continue into March; competitive intensity remains high across all
segments, especially in transmission lines and towers.
» Orders at Rs 82.7bn were down 4% in the period Apr-Feb 2011; transformer
orders see the sharpest fall with orders down 72% YoY and substation
orders dropping 29% YoY. Transmission line orders saw a jump of 53% and
conductor orders are up by 43%.
» Crompton Greaves and BHEL remain our top picks in the sector; we
maintain our SELL rating on ABB India.
Orders gain traction over the last few months
There have been concerns on the street with regard to a slowdown in ordering
from PGCIL over the past year. However, there has been a sharp pick-up in
ordering over the last 3 months (Dec-Feb 2011 orders account for 58% of
ordering); orders placed by PGCIL between April-Feb 2011 now stand at Rs
82.7bn (down 4% YoY). Transformer orders have seen the sharpest fall with
orders being hit on change in pre-qualification norms, in our view. We expect
PGCIL orders to pick up further in March, which historically sees the highest
amount of ordering. For FY11, we would expect orders to be flat to marginally
positive compared to last year’s order flow of INR119bn.
Competitive intensity remains high
There is no let up in competition across segments. Within transformers, the
Chinese (TBEA Shenyang and Baoding) have not been able to win any orders
in FY11; however, Hyosung increased its share to 27% at the expense of
Crompton Greaves. Within substations, the Indian MNCs (ABB, Areva and
Siemens) have managed to recapture 50% share (38% share in FY10), which
could indicate the first signs of consolidation in this segment. Within
transmission lines, KEC International along with Tata Projects, SPIC and EMC
garnered 70% of the orders; Jyoti Structures and L&T have not received any
orders from PGCIL in FY11.
Valuation and picks
The sector has seen a sharp de-rating over the last few months on a slowdown
in ordering along with macro concerns on rising commodity prices and interest
rates. Resumption in ordering from PGCIL may be the first signs of a reversal
in this trend. Our top picks in the sector remain Crompton Greaves and BHEL,
while we maintain a SELL rating on ABB India.
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