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Capital Goods
Order inflows a mixed bag for coverage universe in Q4FY11
The key highlight for capital goods companies was muted order
inflows on the back of reasons like deferment in capex decisions by
corporates (mainly on the industrial side), regulatory hurdles being
faced by various projects and rise in borrowing costs (impacts
incremental IRR for fresh capex). Companies under our coverage
had a mixed quarter in terms of order flows. Companies like Bhel
saw 2% YoY growth on a high base. Among T&D EPC companies,
KEC and Kalpataru Power won orders from PGCIL while IPPs and
international markets witnessed good flows. On the negative side,
mid-sized companies focusing on power generation equipment, BoP
and industrial witnessed disappointing order flows (BGR Energy and
Thermax) as they either lost out to competition and in many cases
regulatory issues resulted in a delay in awarding of orders
(deferment of NTPC bulk tender in FY12 and delay in award of
Rajasthan SEB order where BGR is a key contender).
Margins to remain stable on high execution, high input prices
Owing to better execution and high revenue booking in the last
quarter, our coverage companies will be able to maintain their
EBITDA margins in the face of rising commodity prices. Within our
coverage, Bhel (19.3%), Thermax (12.5%), Jyoti (11.6%, high share
of domestic orders) and Kalpataru (11.7%, high share of domestic
orders) will see constant margins YoY. On the other hand, KEC
(10.6%, high share of fixed price international orders) and McNally
Bharat (8.2%) will report a decline in YoY margins. Overall,
companies in our coverage, in Q4FY11, will report a 16.9% YoY and
16.3% YoY rise in revenue and PAT, respectively.
Bhel and transmission EPC companies better placed
Given a robust order backlog, robust execution and relatively better
order inflows, we expect Bhel and transmission EPC companies to
post better Q4FY11 results (revenue and PAT growth and order
inflows). Bhel will surpass its order inflow and revenue guidance for
FY11. We expect Bhel to post 21.5% YoY and 20.2% YoY jump in
revenues and profitability. In the T&D space, Jyoti reported 18%
YoY revenue growth but muted order inflows while KEC
International reported robust order inflow growth coupled with 12%
YoY and 15.4% jump in revenues and PAT, respectively.
Company specific view
Company Remarks
Bhel We expect the company to clock robust revenue growth of 21.5% YoY, on the back
of the | 1,58,000 crore order backlog as of Q3FY11. We expect Bhel to meets its
order inflow guidance. The EBITDA is expected to remain stable QoQ at 19.2%. We
have built in PAT growth of 20.2% YoY
BGR Energy On a YoY basis, revenues are expected to register de-growth of 10.7% on the back of
the high base effect in Q4FY10. Order inflows have been disappointing in FY11 and
Q4FY11E. On the margins front, we expect EBITDA margins to decline QoQ by 30
bps to 11.3%. PAT is expected to decline 6.4% YoY
Thermax We expect the company to bill significant portion of revenues from the utilities
segment (large ticket order segment). We expect Thermax topline to grow 31% YoY,
driven mainly by 46% YoY and 13% YoY growth in the energy and environment
segment, respectively. PAT is expected to grow 18% YoY
Hindustan Dorr With a reasonable book to bill ratio and muted order inflow during Q4FY11, we
expect the company to report revenue growth of 13% YoY. With increased share of
EPC revenues and higher cost of raw materials, we expect EBITDA margins to
decline QoQ to 10.4%. We expect PAT to rise by 39% YoY
Sterlite
Technologies
We expect the company to register 2% QoQ rise in overall revenues. The tepid
growth will be mainly due to lower execution in the power segment. EBITDA
margins will improve QoQ to 12.9% (7.4% in Q3FY11). PAT is expected to grow by
119% QoQ (low base effect of Q3FY11) and decline 48% YoY
McNally Bharat
Engineering
Consolidated revenues are expected to grow ~8% YoY. On a standalone basis,
revenues are expected to grow ~5%. The company commands a reasonable order
backlog but inflows have been tepid in Q4FY11. We have built in 8.2% EBITDA
margins, implying a decline of 110 bps YoY. PAT will grow 15% YoY
Jyoti Structures FY11 and Q4FY11 have been tepid in terms of order inflows. However, the existing
order backlog will ensure revenue growth of ~18% YoY. Margins will remain
relatively stable at 11.6% YoY (order book skewed towards domestic orders). PAT is
expected to grow by 13.3% YoY
Kalpataru Power We expect standalone revenues to grow by 12%. Order inflows for the company in
Q4FY11 have been reasonable. On the margins front, we expect EBITDA margins to
be at 11.7% (rising by 80 bps YoY). PAT is expected to grow 8% YoY
KEC
International
We expect consolidated revenues to rise by 12% YoY. The company has won
significant orders in Q4FY11 from domestic as well as international markets,
rendering high visibility. EBITDA margins are expected at 10.6% on the back of high
international fixed price orders. PAT is expected to grow by 15.4% YoY
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Capital Goods
Order inflows a mixed bag for coverage universe in Q4FY11
The key highlight for capital goods companies was muted order
inflows on the back of reasons like deferment in capex decisions by
corporates (mainly on the industrial side), regulatory hurdles being
faced by various projects and rise in borrowing costs (impacts
incremental IRR for fresh capex). Companies under our coverage
had a mixed quarter in terms of order flows. Companies like Bhel
saw 2% YoY growth on a high base. Among T&D EPC companies,
KEC and Kalpataru Power won orders from PGCIL while IPPs and
international markets witnessed good flows. On the negative side,
mid-sized companies focusing on power generation equipment, BoP
and industrial witnessed disappointing order flows (BGR Energy and
Thermax) as they either lost out to competition and in many cases
regulatory issues resulted in a delay in awarding of orders
(deferment of NTPC bulk tender in FY12 and delay in award of
Rajasthan SEB order where BGR is a key contender).
Margins to remain stable on high execution, high input prices
Owing to better execution and high revenue booking in the last
quarter, our coverage companies will be able to maintain their
EBITDA margins in the face of rising commodity prices. Within our
coverage, Bhel (19.3%), Thermax (12.5%), Jyoti (11.6%, high share
of domestic orders) and Kalpataru (11.7%, high share of domestic
orders) will see constant margins YoY. On the other hand, KEC
(10.6%, high share of fixed price international orders) and McNally
Bharat (8.2%) will report a decline in YoY margins. Overall,
companies in our coverage, in Q4FY11, will report a 16.9% YoY and
16.3% YoY rise in revenue and PAT, respectively.
Bhel and transmission EPC companies better placed
Given a robust order backlog, robust execution and relatively better
order inflows, we expect Bhel and transmission EPC companies to
post better Q4FY11 results (revenue and PAT growth and order
inflows). Bhel will surpass its order inflow and revenue guidance for
FY11. We expect Bhel to post 21.5% YoY and 20.2% YoY jump in
revenues and profitability. In the T&D space, Jyoti reported 18%
YoY revenue growth but muted order inflows while KEC
International reported robust order inflow growth coupled with 12%
YoY and 15.4% jump in revenues and PAT, respectively.
Company specific view
Company Remarks
Bhel We expect the company to clock robust revenue growth of 21.5% YoY, on the back
of the | 1,58,000 crore order backlog as of Q3FY11. We expect Bhel to meets its
order inflow guidance. The EBITDA is expected to remain stable QoQ at 19.2%. We
have built in PAT growth of 20.2% YoY
BGR Energy On a YoY basis, revenues are expected to register de-growth of 10.7% on the back of
the high base effect in Q4FY10. Order inflows have been disappointing in FY11 and
Q4FY11E. On the margins front, we expect EBITDA margins to decline QoQ by 30
bps to 11.3%. PAT is expected to decline 6.4% YoY
Thermax We expect the company to bill significant portion of revenues from the utilities
segment (large ticket order segment). We expect Thermax topline to grow 31% YoY,
driven mainly by 46% YoY and 13% YoY growth in the energy and environment
segment, respectively. PAT is expected to grow 18% YoY
Hindustan Dorr With a reasonable book to bill ratio and muted order inflow during Q4FY11, we
expect the company to report revenue growth of 13% YoY. With increased share of
EPC revenues and higher cost of raw materials, we expect EBITDA margins to
decline QoQ to 10.4%. We expect PAT to rise by 39% YoY
Sterlite
Technologies
We expect the company to register 2% QoQ rise in overall revenues. The tepid
growth will be mainly due to lower execution in the power segment. EBITDA
margins will improve QoQ to 12.9% (7.4% in Q3FY11). PAT is expected to grow by
119% QoQ (low base effect of Q3FY11) and decline 48% YoY
McNally Bharat
Engineering
Consolidated revenues are expected to grow ~8% YoY. On a standalone basis,
revenues are expected to grow ~5%. The company commands a reasonable order
backlog but inflows have been tepid in Q4FY11. We have built in 8.2% EBITDA
margins, implying a decline of 110 bps YoY. PAT will grow 15% YoY
Jyoti Structures FY11 and Q4FY11 have been tepid in terms of order inflows. However, the existing
order backlog will ensure revenue growth of ~18% YoY. Margins will remain
relatively stable at 11.6% YoY (order book skewed towards domestic orders). PAT is
expected to grow by 13.3% YoY
Kalpataru Power We expect standalone revenues to grow by 12%. Order inflows for the company in
Q4FY11 have been reasonable. On the margins front, we expect EBITDA margins to
be at 11.7% (rising by 80 bps YoY). PAT is expected to grow 8% YoY
KEC
International
We expect consolidated revenues to rise by 12% YoY. The company has won
significant orders in Q4FY11 from domestic as well as international markets,
rendering high visibility. EBITDA margins are expected at 10.6% on the back of high
international fixed price orders. PAT is expected to grow by 15.4% YoY
Source: Company, ICICIdirect.com Research
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