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Areva secures orders worth `400cr
Areva T&D India (Areva) has won a contract from Rajasthan Rajya Vidyut Prasaran
Nigam Ltd. (RRVPNL). Valued at `400cr, the contract work includes turnkey
construction of 765kV substation including extra high voltage (EHV) transformers
and reactors. It also includes a long-term maintenance contract for the substation.
While this high-value order is an added positive; it does little to alter our view on
the company.
Delay in generation projects (on the back of deepening fuel crisis, environment
clearance, weak merchant realizations and poor health of SEBs, among others) is
likely to postpone the associated T&D spending both from PGCIL and the SEBs
(leading to lower order inflows). In addition, Chinese and Korean competition
continues to be unabated – suppliers continue to dump products in the Indian
market at cheap prices (price erosion of 20-25%). This is giving tough competition
to local players in India (read Areva, Crompton and ABB). Considering these
factors, the market leadership of the company and margin improvement thesis
(notably, on the declining trend) does not augur well.
The stock currently trades at rich valuations of 26.7x and 18.9x CY2011E and
CY2012E EPS, respectively. Given the negatives surmounting the T&D space, the
stock seems to be fairly valued and upside from the current level seems limited.
Hence, we continue to remain Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Areva secures orders worth `400cr
Areva T&D India (Areva) has won a contract from Rajasthan Rajya Vidyut Prasaran
Nigam Ltd. (RRVPNL). Valued at `400cr, the contract work includes turnkey
construction of 765kV substation including extra high voltage (EHV) transformers
and reactors. It also includes a long-term maintenance contract for the substation.
While this high-value order is an added positive; it does little to alter our view on
the company.
Delay in generation projects (on the back of deepening fuel crisis, environment
clearance, weak merchant realizations and poor health of SEBs, among others) is
likely to postpone the associated T&D spending both from PGCIL and the SEBs
(leading to lower order inflows). In addition, Chinese and Korean competition
continues to be unabated – suppliers continue to dump products in the Indian
market at cheap prices (price erosion of 20-25%). This is giving tough competition
to local players in India (read Areva, Crompton and ABB). Considering these
factors, the market leadership of the company and margin improvement thesis
(notably, on the declining trend) does not augur well.
The stock currently trades at rich valuations of 26.7x and 18.9x CY2011E and
CY2012E EPS, respectively. Given the negatives surmounting the T&D space, the
stock seems to be fairly valued and upside from the current level seems limited.
Hence, we continue to remain Neutral on the stock.
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