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Engineering, Capital Goods & Infrastructure (ECI)
Our ECI universe is expected to report strong performance in Q4FY11E with net profit growth at 54.8% yoy – this is
largely attributed to (1) BHEL (Provisional results declared – APAT up 47% yoy to Rs28.1 bn) and (2) Punj Lloyd
(reported Rs6.2 bn loss in Q4FY10). Hence, below analysis is excluding BHEL & Punj Lloyd
n After strong 9MFY11 (+23.7%), expect revenue growth of 19.8% yoy to Rs249.8 bn – led by outstanding order backlog.
Strong revenue growth à amongst large caps by Cummins (+44%) and Thermax (+24%) and amongst small caps by
LMW (+43%), TRF (+43%), McNally Bharat (+38%), Indo Tech (+75%) and Bharat Bijlee (+32%)
n Subdued EBITDA growth at 12.3% yoy to Rs33.2 bn and 90 bps yoy decline in EBITDA margins to 13.3% (on high
base in Q4FY10). Drop in EBITDA margins will be led by L&T (-140 bps yoy), Cummins (-70 bps) and Thermax (-10
bps). Blue Star to report margin expansion of 50 bps.
n Led by subdued operational performance, APAT growth expected to be lower at 9.5% yoy to Rs21.1 bn – largely
attributed to lower other income and high interest costs. Amongst large caps expect Cummins India to deliver strong
growth at 35% yoy. While LMW (+39%), Greaves Cotton (+29%) and EMCO (+61%) to have robust performance in midcaps.
L&T, Voltas, Blue Star, TRF, McNally Bharat and Elecon to report growth ranging between 0-8%.
n Asking rate for order inflows in Q4FY11E stood at Rs466.3 bn (41% of FY11E target order flows or growth of 52% yoy)
– we believe ECI universe would find it difficult to meet expectation owing to fragile business environment and hence
there will be spill-over of order finalization in H1FY12E.
We would closely scrutinize (1) trend in investment spends (2) growth outlook for FY12E (3) pressure on operating
margins and (4) order finalization.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Engineering, Capital Goods & Infrastructure (ECI)
Our ECI universe is expected to report strong performance in Q4FY11E with net profit growth at 54.8% yoy – this is
largely attributed to (1) BHEL (Provisional results declared – APAT up 47% yoy to Rs28.1 bn) and (2) Punj Lloyd
(reported Rs6.2 bn loss in Q4FY10). Hence, below analysis is excluding BHEL & Punj Lloyd
n After strong 9MFY11 (+23.7%), expect revenue growth of 19.8% yoy to Rs249.8 bn – led by outstanding order backlog.
Strong revenue growth à amongst large caps by Cummins (+44%) and Thermax (+24%) and amongst small caps by
LMW (+43%), TRF (+43%), McNally Bharat (+38%), Indo Tech (+75%) and Bharat Bijlee (+32%)
n Subdued EBITDA growth at 12.3% yoy to Rs33.2 bn and 90 bps yoy decline in EBITDA margins to 13.3% (on high
base in Q4FY10). Drop in EBITDA margins will be led by L&T (-140 bps yoy), Cummins (-70 bps) and Thermax (-10
bps). Blue Star to report margin expansion of 50 bps.
n Led by subdued operational performance, APAT growth expected to be lower at 9.5% yoy to Rs21.1 bn – largely
attributed to lower other income and high interest costs. Amongst large caps expect Cummins India to deliver strong
growth at 35% yoy. While LMW (+39%), Greaves Cotton (+29%) and EMCO (+61%) to have robust performance in midcaps.
L&T, Voltas, Blue Star, TRF, McNally Bharat and Elecon to report growth ranging between 0-8%.
n Asking rate for order inflows in Q4FY11E stood at Rs466.3 bn (41% of FY11E target order flows or growth of 52% yoy)
– we believe ECI universe would find it difficult to meet expectation owing to fragile business environment and hence
there will be spill-over of order finalization in H1FY12E.
We would closely scrutinize (1) trend in investment spends (2) growth outlook for FY12E (3) pressure on operating
margins and (4) order finalization.
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