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Boiler bulk tender – sensible bids
Doosan Heavy has emerged as the L1 bidder for NTPC’s 9x800MW boiler
bulk tender. The encouraging bits about these bids are that the L1 bid
(Rs16.4m/MW) does not look too aggressive, the price difference
between the L1 and L4 bidders is just 8.5%, the new entrants (BGR and
Thermax) have not bid aggressively. These are just ‘read out’ bids and
adjusted bid price (for technical and commercial factors) could be
different. Prima-facie, BHEL should be able to match the L1 price and get
4x800MW (c.Rs50bn) order without compromising on margins. BUY.
Bids for NTPC’s boilers bulk tender opened
Pricing bids for NTPC’s 9 x 800MW boiler bulk tender were opened yesterday.
Doosan Heavy (Korea) emerged as the L1 bidder followed by L&T-MHI, BHEL,
BGR–Hitachi and Thermax–B&W. These are ‘read out’ bid prices and adjusted
bid prices could be different. If Doosan remains L1 in adjusted prices as well
(likely scenario) it will bag order for 5 units. BHEL will get the order for the
remaining four units, if it agrees to match the L1 price.
Sensible bids; not much difference between the top four players
Doosan Heavy’s L1 quotation implies a realisation of c.Rs16.4m/MW. This is
c.5% higher than BHEL’s earlier boiler bid for the 1,600MW Krishnapatnam
plant (Tamil Nadu SEB), and thus looks reasonable. For this 800MW bulk
tender, BHEL’s bid was c.8% higher than the Doosan’s, suggesting that it
should be able to match the L1 price without compromising on the margins.
BGR, Thermax not very aggressive – a +ve sign
Despite the importance of the bulk tender in an environment where few
projects are getting awarded, BGR-Hitachi and Thermax-B&W did not bid very
aggressively, with their quotes being 10% and 27% higher than the L1 price
respectively. This is partly on account of higher imported component from
their foreign JV partners (which increases costs), and also suggests that the
newer players are not looking to compete on pricing with the incumbents.
BHEL should match L1 without compromising on margins
The TG tenders will be opened today. If trend in boiler bidding is anything to
go by, the results should ease investor concerns of industry-wide pricing
pressure and margin erosion. Unlike L&T’s initial bids (for Krishnapatnam TG
order, L&T had bid 24% lower than BHEL), new players are not bidding very
aggressively, as it is difficult to match BHEL’s advantages of scale and
indigenisation. Moreover, for EPC projects, some of the new entrants (like
Thermax-B&W, Bharat Forge–Alstom and BGR-Hitachi) will find it difficult to
compete with L&T and BHEL as they do not have established EPC teams.
BHEL’s valuations look attractive at 13x FY12 PE; maintain BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Boiler bulk tender – sensible bids
Doosan Heavy has emerged as the L1 bidder for NTPC’s 9x800MW boiler
bulk tender. The encouraging bits about these bids are that the L1 bid
(Rs16.4m/MW) does not look too aggressive, the price difference
between the L1 and L4 bidders is just 8.5%, the new entrants (BGR and
Thermax) have not bid aggressively. These are just ‘read out’ bids and
adjusted bid price (for technical and commercial factors) could be
different. Prima-facie, BHEL should be able to match the L1 price and get
4x800MW (c.Rs50bn) order without compromising on margins. BUY.
Bids for NTPC’s boilers bulk tender opened
Pricing bids for NTPC’s 9 x 800MW boiler bulk tender were opened yesterday.
Doosan Heavy (Korea) emerged as the L1 bidder followed by L&T-MHI, BHEL,
BGR–Hitachi and Thermax–B&W. These are ‘read out’ bid prices and adjusted
bid prices could be different. If Doosan remains L1 in adjusted prices as well
(likely scenario) it will bag order for 5 units. BHEL will get the order for the
remaining four units, if it agrees to match the L1 price.
Sensible bids; not much difference between the top four players
Doosan Heavy’s L1 quotation implies a realisation of c.Rs16.4m/MW. This is
c.5% higher than BHEL’s earlier boiler bid for the 1,600MW Krishnapatnam
plant (Tamil Nadu SEB), and thus looks reasonable. For this 800MW bulk
tender, BHEL’s bid was c.8% higher than the Doosan’s, suggesting that it
should be able to match the L1 price without compromising on the margins.
BGR, Thermax not very aggressive – a +ve sign
Despite the importance of the bulk tender in an environment where few
projects are getting awarded, BGR-Hitachi and Thermax-B&W did not bid very
aggressively, with their quotes being 10% and 27% higher than the L1 price
respectively. This is partly on account of higher imported component from
their foreign JV partners (which increases costs), and also suggests that the
newer players are not looking to compete on pricing with the incumbents.
BHEL should match L1 without compromising on margins
The TG tenders will be opened today. If trend in boiler bidding is anything to
go by, the results should ease investor concerns of industry-wide pricing
pressure and margin erosion. Unlike L&T’s initial bids (for Krishnapatnam TG
order, L&T had bid 24% lower than BHEL), new players are not bidding very
aggressively, as it is difficult to match BHEL’s advantages of scale and
indigenisation. Moreover, for EPC projects, some of the new entrants (like
Thermax-B&W, Bharat Forge–Alstom and BGR-Hitachi) will find it difficult to
compete with L&T and BHEL as they do not have established EPC teams.
BHEL’s valuations look attractive at 13x FY12 PE; maintain BUY.
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