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TG bulk tender - aggressive bids
BGR-Hitachi has emerged as the L1 bidder for NTPC’s 9x800MW TG bulk
tender and should get orders for two projects (4-5 units). Its adjusted bid
(~Rs10m/MW) appears aggressive when compared with BHEL’s earlier
TG bid for NTPC’s Barh project (~Rs11m/MW) and Bharat Forge-Alstom’s
bid for NTPC’s 660MW TG tender. BHEL can get order for one project (2-3
units) if it matches BGR’s price. Either L&T or JSW-Toshiba will be the L3
in that case, and should get the order for the remaining one project. L&T
and BGR are confident of earning double digit Ebitda margins on these
projects. BGR’s claim appears unrealistic, given low local manufacturing.
BGR may get 4-5 units; BHEL is L2; L&T or JSW Energy is L3
BGR has emerged as the L1 bidder for NTPC’s 9x800MW TG set bulk tender,
quoting a price (adjusted for technical and commercial differences) of
~Rs73bn (Rs10.1m/MW). BHEL will be considered the L2 bidder and awarded
one project (two or three units; Rs16-25bn), if it agrees to match the L1 bid.
It seems there is some confusion on whether L&T or JSW-Toshiba is L3 and
who will get the order for the remaining one project.
Bidding for TG is aggressive; bidders do not think so…
BGR’s bid is ~10% lower than BHEL’s bid for NTPC’s Barh project
(~Rs11m/MW); it is also lower than Bharat Forge-Alstom’s (L1) bid for NTPC’s
11x660MW TG tender. BGR management believes that the company can still
generate 10% PBT margin (implying at least 15% Ebitda margin) on the
project. L&T is also confident of earning double digit Ebitda margin. L&T will
have higher local manufacturing compared to BGR and thus lower costs. L&T’s
target appears achievable; that of BGR looks unrealistic.
BHEL’s margins on the TG project could be lower than usual
Given that equipment order flow has slowed down over the last few months,
we expect BHEL to match the L1 bid and take the order for 2-3 units. If L&T’s
target of 12% margins is achievable, we believe BHEL should be able to earn
15-18% margins, lower than our estimate of 18.6% margins for FY12. This
will be to partly compensated by sensible bidding for the boiler tender
(Doosan L1; Rs16.4m/MW; c.5% higher than BHEL’s earlier boiler bid for the
1,600MW Krishnapatnam plant). We believe that BGR’s bids will be more
sensible going forward (like L&T who had bid aggressively to get a foothold in
the market and has been bidding sensibly thereafter). BGR’s manufacturing
facility is largely debt funded and it cannot afford to continue bidding
aggressively. BHEL has substantial competitive advantages in terms of
economies of scale and high localisation (which are accepted by competitors
as well) and will continue to get margin premium over competitors.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
TG bulk tender - aggressive bids
BGR-Hitachi has emerged as the L1 bidder for NTPC’s 9x800MW TG bulk
tender and should get orders for two projects (4-5 units). Its adjusted bid
(~Rs10m/MW) appears aggressive when compared with BHEL’s earlier
TG bid for NTPC’s Barh project (~Rs11m/MW) and Bharat Forge-Alstom’s
bid for NTPC’s 660MW TG tender. BHEL can get order for one project (2-3
units) if it matches BGR’s price. Either L&T or JSW-Toshiba will be the L3
in that case, and should get the order for the remaining one project. L&T
and BGR are confident of earning double digit Ebitda margins on these
projects. BGR’s claim appears unrealistic, given low local manufacturing.
BGR may get 4-5 units; BHEL is L2; L&T or JSW Energy is L3
BGR has emerged as the L1 bidder for NTPC’s 9x800MW TG set bulk tender,
quoting a price (adjusted for technical and commercial differences) of
~Rs73bn (Rs10.1m/MW). BHEL will be considered the L2 bidder and awarded
one project (two or three units; Rs16-25bn), if it agrees to match the L1 bid.
It seems there is some confusion on whether L&T or JSW-Toshiba is L3 and
who will get the order for the remaining one project.
Bidding for TG is aggressive; bidders do not think so…
BGR’s bid is ~10% lower than BHEL’s bid for NTPC’s Barh project
(~Rs11m/MW); it is also lower than Bharat Forge-Alstom’s (L1) bid for NTPC’s
11x660MW TG tender. BGR management believes that the company can still
generate 10% PBT margin (implying at least 15% Ebitda margin) on the
project. L&T is also confident of earning double digit Ebitda margin. L&T will
have higher local manufacturing compared to BGR and thus lower costs. L&T’s
target appears achievable; that of BGR looks unrealistic.
BHEL’s margins on the TG project could be lower than usual
Given that equipment order flow has slowed down over the last few months,
we expect BHEL to match the L1 bid and take the order for 2-3 units. If L&T’s
target of 12% margins is achievable, we believe BHEL should be able to earn
15-18% margins, lower than our estimate of 18.6% margins for FY12. This
will be to partly compensated by sensible bidding for the boiler tender
(Doosan L1; Rs16.4m/MW; c.5% higher than BHEL’s earlier boiler bid for the
1,600MW Krishnapatnam plant). We believe that BGR’s bids will be more
sensible going forward (like L&T who had bid aggressively to get a foothold in
the market and has been bidding sensibly thereafter). BGR’s manufacturing
facility is largely debt funded and it cannot afford to continue bidding
aggressively. BHEL has substantial competitive advantages in terms of
economies of scale and high localisation (which are accepted by competitors
as well) and will continue to get margin premium over competitors.
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