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Industrials
India
PGCIL keeps pace but still not good enough for equipment manufacturers.
Strong March ordering supported by the HVDC order led to 40% growth in FY11 PGCIL
awards. Tower and substation business grew while equipment activity declined even as
Chinese/Korean competition remained strong. We note divergence in PGCIL’s stance in
disqualifying non-performing vendors in towers but lowering qualifications in substation
space. Crompton loses share in equipment though shallow ordering constrains
conclusions. PGCIL possibly contributes 15-20% of overall T&D equipment demand.
Thus it is not the sole driver of business and Improvement in a broad capex scenario is
as important.
March orders lifted by one-time HVDC order; tower, substation grow, equipment disappoints
PGCIL awarded orders worth Rs100 bn in March-11 taking full year ordering to Rs173 bn (up 40%
yoy. The 800kV HVDC order accounted for Rs53 bn to the March orders. Domestic value to the
HVDC order is only Rs23 bn (BHEL and ABB India), further reducing the importance of an
otherwise important sector event. Towers and substation orders reflect strong growth in FY2011
while equipment activity at Rs14 bn declined to less than half of FY2010 levels. Chinese/Korean
competition stayed strong accounting for about a third of the market.
Divergent stance by PGCIL in Tower and Substation ordering
PGCIL has recently awarded tower projects to Kalpataru, KEC, L&T even though these were not L1;
disqualified non performing vendors even post opening the price bid based on previous track
record) The move augurs well for the tower space though competitive intensity would remain
strong, in our view. In contrast, PGCIL has started to exclude circuit breakers from substation
package ordering. We believe this may reduce entry barriers for non-T&D equipment
manufacturing companies in bidding for substation execution business (Siemens, Areva and ABB
have high market share in this business so far).
Tata Projects leads the pack in tower space; Crompton hit by equip. share loss in shrinking pie
In the tower segment (Rs56 bn), Tata Projects led the pack with a 22% share in FY2011. It is
followed by a long list of strong competitors (KEC, Kalpataru, L&T), each having significant market
share and a big tail of other as well. Conductor ordering (Rs27 bn) was dominated by Sterlite
(40% share) followed smaller domestic players. In the equipment space (Rs14 bn), Crompton’s
share declined significantly to 17% (including full JV revenues) versus 28% levels in the past two
years though it is difficult to conclude anything considering shallow FY2011 equipment data.
PGCIL not as important as believed for sector; contributes bout 15-20% of orders to companies
We highlight that PGCIL awards account for about 20% of the total T&D ordering for domestic
majors (ABB, Areva and Crompton) over the past three years. We highlight that CRG had won
orders worth Rs6 bn in FY2009 (versus a total of Rs29 bn) and Rs10 bn in FY2010 (versus a total
of Rs31 bn. CRG has won orders only worth Rs2.5 bn in FY2011 from PGCIL. Similarly, ABB had
won orders worth Rs1.8 bn in CY2010 and Rs8 bn in CY2009 (versus T&D orders of Rs57 bn).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Industrials
India
PGCIL keeps pace but still not good enough for equipment manufacturers.
Strong March ordering supported by the HVDC order led to 40% growth in FY11 PGCIL
awards. Tower and substation business grew while equipment activity declined even as
Chinese/Korean competition remained strong. We note divergence in PGCIL’s stance in
disqualifying non-performing vendors in towers but lowering qualifications in substation
space. Crompton loses share in equipment though shallow ordering constrains
conclusions. PGCIL possibly contributes 15-20% of overall T&D equipment demand.
Thus it is not the sole driver of business and Improvement in a broad capex scenario is
as important.
March orders lifted by one-time HVDC order; tower, substation grow, equipment disappoints
PGCIL awarded orders worth Rs100 bn in March-11 taking full year ordering to Rs173 bn (up 40%
yoy. The 800kV HVDC order accounted for Rs53 bn to the March orders. Domestic value to the
HVDC order is only Rs23 bn (BHEL and ABB India), further reducing the importance of an
otherwise important sector event. Towers and substation orders reflect strong growth in FY2011
while equipment activity at Rs14 bn declined to less than half of FY2010 levels. Chinese/Korean
competition stayed strong accounting for about a third of the market.
Divergent stance by PGCIL in Tower and Substation ordering
PGCIL has recently awarded tower projects to Kalpataru, KEC, L&T even though these were not L1;
disqualified non performing vendors even post opening the price bid based on previous track
record) The move augurs well for the tower space though competitive intensity would remain
strong, in our view. In contrast, PGCIL has started to exclude circuit breakers from substation
package ordering. We believe this may reduce entry barriers for non-T&D equipment
manufacturing companies in bidding for substation execution business (Siemens, Areva and ABB
have high market share in this business so far).
Tata Projects leads the pack in tower space; Crompton hit by equip. share loss in shrinking pie
In the tower segment (Rs56 bn), Tata Projects led the pack with a 22% share in FY2011. It is
followed by a long list of strong competitors (KEC, Kalpataru, L&T), each having significant market
share and a big tail of other as well. Conductor ordering (Rs27 bn) was dominated by Sterlite
(40% share) followed smaller domestic players. In the equipment space (Rs14 bn), Crompton’s
share declined significantly to 17% (including full JV revenues) versus 28% levels in the past two
years though it is difficult to conclude anything considering shallow FY2011 equipment data.
PGCIL not as important as believed for sector; contributes bout 15-20% of orders to companies
We highlight that PGCIL awards account for about 20% of the total T&D ordering for domestic
majors (ABB, Areva and Crompton) over the past three years. We highlight that CRG had won
orders worth Rs6 bn in FY2009 (versus a total of Rs29 bn) and Rs10 bn in FY2010 (versus a total
of Rs31 bn. CRG has won orders only worth Rs2.5 bn in FY2011 from PGCIL. Similarly, ABB had
won orders worth Rs1.8 bn in CY2010 and Rs8 bn in CY2009 (versus T&D orders of Rs57 bn).
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