Transformers & Rectifiers Entering into big league; stay invested :: Emkay

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Transformers & Rectifiers

Entering into big league; stay invested

BUY

CMP: Rs 282                                       Target Price: Rs 352

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n     TRIL’s Q4 performance was impacted by (1) lower overall dispatches due to delivery slippages from customer’s side and (2) relatively higher dispatches of low margin 400kv

n     Positives not yet factored (1) JV with ZTG & L1 in eight 765kv transformers (Rs1.2bn), (2) on schedule delivery of 1200kv in May 2011E & (3) successful deliveries & performance of 400kv and exp. qualification in PGCIL/NTPC orders

n     TRIL is quickly entering into big league of transformer mfrs (Crompton greaves, ABB, Areva and Siemens) with a capacity to deliver across ranges though only transformers

n     Some pain left due to lower entry prices, but due for re-rating in valuations - trading at 3.2xFY13E EV/EBITDA vs bigger cos which trade at 9-21x 1-yr fwd EV/EBITDA. Upgrade to ‘Buy’