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BGR Energy
D r y s p e l l f o r o r d e r i n f l o w s c o n t i n u e s …
BGR Energy (BGR) declared an in line set of results for Q1FY12. Revenues
declined ~19% YoY, which were in line with our estimates. The only
silver lining was better than expected EBITDA margins of 13.1% vs. our
estimate of 11.2%. Expansion in EBITDA margins was owing to higher
share of BoP revenues at 40% in the overall revenues. Also, high working
capital requirement and higher borrowing costs led to 55% rise in interest
costs. Hence, PAT for Q1FY12 stood at | 50 crore, which was better than
our estimates as expansion in margins, to some extent, cushioned the
decline in revenues. Going ahead, we believe a delay in project awards in
the power sector has put FY13E revenue profile at huge risk for BGR.
ƒ FY13E revenue visibility highly dependent on new project awards
Order backlog of | 7500 crore with a book to bill ratio of 1.6x, poses
significant risk to growth in FY13E revenues. The management has
guided for 15% revenue growth in FY12E on the current order backlog.
However, a delay in project awards will put a question mark on growth in
FY13E. BGR has bid for projects worth ~| 20,000 crore and expects some
of them to get finalised by Q2/Q3FY12E. The company expects to execute
significant portion of BoP projects in FY12E. We estimate revenue CAGR
of 11% over FY11-13E.
ƒ EBIDTA margins to inch up on high BoP project execution
EBITDA margins at 13.2% were a key positive surprise for BGR in Q1FY12
on the back of higher share of BoP project revenues. The management
has increased the margin guidance to 12-13% in FY12 as it expects to
execute significant BoP revenues. Similarly, we have revised our margin
estimates to 12.2% in FY12E and 11.3% in FY13E.
V a l u a t i o n
The dry spell of order inflows over the last few years has led to a huge
underperformance in BGR’s stock price. We have revised our earnings
forecast in FY12 and FY13 to factor in higher interest costs and increase in
margins for FY12. We value BGR at 10x on FY13EPS (target reduced from
| 511 to | 471). However, at the same time, note that any significant order
win will lead to a violent re-rating of earnings and P/E multiples.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BGR Energy
D r y s p e l l f o r o r d e r i n f l o w s c o n t i n u e s …
BGR Energy (BGR) declared an in line set of results for Q1FY12. Revenues
declined ~19% YoY, which were in line with our estimates. The only
silver lining was better than expected EBITDA margins of 13.1% vs. our
estimate of 11.2%. Expansion in EBITDA margins was owing to higher
share of BoP revenues at 40% in the overall revenues. Also, high working
capital requirement and higher borrowing costs led to 55% rise in interest
costs. Hence, PAT for Q1FY12 stood at | 50 crore, which was better than
our estimates as expansion in margins, to some extent, cushioned the
decline in revenues. Going ahead, we believe a delay in project awards in
the power sector has put FY13E revenue profile at huge risk for BGR.
ƒ FY13E revenue visibility highly dependent on new project awards
Order backlog of | 7500 crore with a book to bill ratio of 1.6x, poses
significant risk to growth in FY13E revenues. The management has
guided for 15% revenue growth in FY12E on the current order backlog.
However, a delay in project awards will put a question mark on growth in
FY13E. BGR has bid for projects worth ~| 20,000 crore and expects some
of them to get finalised by Q2/Q3FY12E. The company expects to execute
significant portion of BoP projects in FY12E. We estimate revenue CAGR
of 11% over FY11-13E.
ƒ EBIDTA margins to inch up on high BoP project execution
EBITDA margins at 13.2% were a key positive surprise for BGR in Q1FY12
on the back of higher share of BoP project revenues. The management
has increased the margin guidance to 12-13% in FY12 as it expects to
execute significant BoP revenues. Similarly, we have revised our margin
estimates to 12.2% in FY12E and 11.3% in FY13E.
V a l u a t i o n
The dry spell of order inflows over the last few years has led to a huge
underperformance in BGR’s stock price. We have revised our earnings
forecast in FY12 and FY13 to factor in higher interest costs and increase in
margins for FY12. We value BGR at 10x on FY13EPS (target reduced from
| 511 to | 471). However, at the same time, note that any significant order
win will lead to a violent re-rating of earnings and P/E multiples.
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