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Industrials
Pre-Result Buys in Sector: Suzlon
Pre-Result Underperform: ABB, L&T, IVRC, NJCC
E&C
�� We expect a 48%YoY growth in rec. PAT of Indian Engineering &
Construction (E&C) majors mainly led by turnaround at Suzlon and improved
execution (L&T) despite a) weak margin - IVRC, L&T, NJCC, and b) higher
fixed costs (interest and depreciation) – ABB, IVRC, L&T, NJCC. We expect
Suzlon to report rec. profit of Rs220mn (vs Rs3.8bn of loss in 2Q11) on
rebound in domestic wind markets and that represents 26% of the YoY swing
required to report PAT of Rs5.2bn for FY12E.
�� We expect double digit growth in order backlog for most E&C companies.
The key issues to watch-out for in the E&C sector is likely improved
execution and impact of on-ground execution challenges such as land
acquisition.
�� We expect the Indian E&C Sector, represented by L&T, Suzlon, ABB, IVRCL
and NJCC to report sales growth of 17%YoY, EBITDA growth of 26%YoY
and Recurring PAT growth of 48%YoY.
�� L&T: In 2QFY12, L&T’s has announced orders of Rs79bn down 14% vs orders
announced in 2Q11 on lack of captive order, which were 23% of inflows last
year. Key order wins in 2Q a) big ticket international project wins in electrical
and oil & gas domains from customers such as ADMA-OPCO (Rs20bn), Qatar
General Electricity & Water Corp (Rs12bn), Abu Dhabi Gas Industries
(Rs8.4bn) Petroleum Development Oman (Rs7bn), and b) balance Rs32bn
order in building & factories. We expect L&T to post one of the better financials
with rebound in sales growth (18%YoY) and PAT (15%YoY) in our universe.
Markets would also be more focused on any change in the guidance for new
orders in FY12E, which could be key reason for disappointment.
�� ABB: Meanwhile, in 3QCY11 ABB could report rec. PAT of Rs569mn vs loss
of Rs204mn in 3QCY10 on a) exit costs on rural electrification business last
year, and b) 25%YoY sales growth on a low base 3Q10 (-8%YoY). However,
the deteriorating visibility and rich valuation drive our Underperform rating.
�� Suzlon – turnaround story: With early turnaround in 1Q12, we expect Suzlon
to maintain momentum in 2QFY12 by reporting consolidated rec. profit of
Rs220mn vs rec loss of Rs3.8bn on +30%YoY domestic sales volumes. Mix
change in favor of India should drive 241%YoY growth EBITDA.
�� IVRC: We expect IVRCL to report a weak 2Q12 with rec. PAT -80%YoY and
a flat EBITDA on slow execution sales +8%YoY accompanied by high
depreciation and interest costs. It has announced Rs22.3bn of orders
including Rs14.9bn Nechipu-Hoj Annuity based road project won by IVRCL
Assets and Sushee Infra consortium (26:74).
�� Expect NJCC’s to report a slow growth in sales at 6%YoY and flat EBITDA in
2QFY12. This along with high depreciation and interest would lead to a
37%YoY fall in rec. PAT.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Industrials
Pre-Result Buys in Sector: Suzlon
Pre-Result Underperform: ABB, L&T, IVRC, NJCC
E&C
�� We expect a 48%YoY growth in rec. PAT of Indian Engineering &
Construction (E&C) majors mainly led by turnaround at Suzlon and improved
execution (L&T) despite a) weak margin - IVRC, L&T, NJCC, and b) higher
fixed costs (interest and depreciation) – ABB, IVRC, L&T, NJCC. We expect
Suzlon to report rec. profit of Rs220mn (vs Rs3.8bn of loss in 2Q11) on
rebound in domestic wind markets and that represents 26% of the YoY swing
required to report PAT of Rs5.2bn for FY12E.
�� We expect double digit growth in order backlog for most E&C companies.
The key issues to watch-out for in the E&C sector is likely improved
execution and impact of on-ground execution challenges such as land
acquisition.
�� We expect the Indian E&C Sector, represented by L&T, Suzlon, ABB, IVRCL
and NJCC to report sales growth of 17%YoY, EBITDA growth of 26%YoY
and Recurring PAT growth of 48%YoY.
�� L&T: In 2QFY12, L&T’s has announced orders of Rs79bn down 14% vs orders
announced in 2Q11 on lack of captive order, which were 23% of inflows last
year. Key order wins in 2Q a) big ticket international project wins in electrical
and oil & gas domains from customers such as ADMA-OPCO (Rs20bn), Qatar
General Electricity & Water Corp (Rs12bn), Abu Dhabi Gas Industries
(Rs8.4bn) Petroleum Development Oman (Rs7bn), and b) balance Rs32bn
order in building & factories. We expect L&T to post one of the better financials
with rebound in sales growth (18%YoY) and PAT (15%YoY) in our universe.
Markets would also be more focused on any change in the guidance for new
orders in FY12E, which could be key reason for disappointment.
�� ABB: Meanwhile, in 3QCY11 ABB could report rec. PAT of Rs569mn vs loss
of Rs204mn in 3QCY10 on a) exit costs on rural electrification business last
year, and b) 25%YoY sales growth on a low base 3Q10 (-8%YoY). However,
the deteriorating visibility and rich valuation drive our Underperform rating.
�� Suzlon – turnaround story: With early turnaround in 1Q12, we expect Suzlon
to maintain momentum in 2QFY12 by reporting consolidated rec. profit of
Rs220mn vs rec loss of Rs3.8bn on +30%YoY domestic sales volumes. Mix
change in favor of India should drive 241%YoY growth EBITDA.
�� IVRC: We expect IVRCL to report a weak 2Q12 with rec. PAT -80%YoY and
a flat EBITDA on slow execution sales +8%YoY accompanied by high
depreciation and interest costs. It has announced Rs22.3bn of orders
including Rs14.9bn Nechipu-Hoj Annuity based road project won by IVRCL
Assets and Sushee Infra consortium (26:74).
�� Expect NJCC’s to report a slow growth in sales at 6%YoY and flat EBITDA in
2QFY12. This along with high depreciation and interest would lead to a
37%YoY fall in rec. PAT.
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