Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DIAMOND POWER INFRASTRUCTURE LTD
PRICE: RS.117 RECOMMENDATION: BUY
TARGET PRICE: RS.179 FY13E P/E: 4.4X
q Numbers are ahead of our expectations mainly led by the cables division.
Order book is healthy at Rs 17 bn. For the current fiscal, we believe
cables would be the main growth driver as the EPC projects and transformer
divisions continue to remain subdued.
q The stock is trading at very attractive valuations. We maintain BUY with
a target price of Rs 179 (Rs 173 earlier).
q Concerns: Deteriorating financial health of SEBs remains a key concern
for the stock.
Robust growth in cables offsets weakness in conductor and EPC
divisions
Revenue for the quarter rose 30% yoy on account of strong growth in cables division.
Conductor segment revenues were down 5% yoy on partly on account of decline
in Aluminum prices. During the quarter, the company sold 7050 tons of conductors
vs 7200 tons in Q2 FY11. The realization at Rs 139333 per ton was marginally
lower due to yoy decline in aluminum prices during the quarter.
In the EPC segment revenues has been lower on subdued order backlog. The company
has been selective in taking fresh orders in the EPC segment as the pricing has
been unremunerative.
The cables segment posted robust growth aided by capacity addition and sustained
demand from the power and industrial sector. DPIL has raised its LT cables capacity
from 8800 kms to 33000 kms and HT cables capacity from 2800 kms to 5600 kms
in Q4 FY10. The company has been aggressively marketing its LV and MV cables in
the retail market.
Maintained margins at healthy level despite material price inflation
Despite the all-round commodity price inflation especially in copper and aluminum,
the company managed to preserve margins. The conductor segment reported
healthy margins on account of its focus on distribution conductors (thinner compared
to transmission conductors). Also, compared to larger peers who are mainly into
ACSR conductors, DPIL has a higher share of All Aluminum Alloy Conductor
("AAAC"). EBIT per ton in conductors declined to Rs 15300 per ton vs Rs 19694 per
ton.
Employee costs rose sharply during the quarter on account of addition of employees
for its expansion projects.
Sharp margin expansion in transformers division was surprising given that the sector
peers are reporting margin pressures. The management indicated that the profits
included variation claims pertaining to the previous quarters and segment margins
should revert back to the normal levels of 8-10%.
Other developments
n DPIL has commissioned Extra High Voltage Cables plant to manufacture 500 KV
cables. The plant has been supplied by Maillefer, France. Globally, there are only
seven manufacturers with capability to make upto 500 KV cables.
n The company has started trial production for the plant and expects to manufacture
33-66 KV cables and progressively move towards 220 KV and above EHV
cables.
n The company has completed type testing for the 66-220 KV voltage levels. It
now needs to complete the PQ test (Prequalification) which is to be conducted in
China and the duration of testing is 3 months. Accordingly, the testing for the
product sample would start from 20 Dec 2011 to 20 March 2012 period.
n Meanwhile since it has completed the type-testing of cables, it is eligible for bidding
for private sector orders. The company has already bid for 4 large orders,
which are expected to be finalized by February 2012.
n Pending the requisite approvals, the company plans to utilize its EHV cables plant
to manufacture medium-voltage cables. This would substantially enhance its MV
cables throughput.
n The company's transmission towers plant with a capacity of 48000 mtpa has
commenced commercial operations. The Company has an order backlog of Rs
1.1 bn aggregating 35000 MT to be supplied over the next 8 months.
n The management indicated that profitability in the tower segment could remain
weak in the Q3 as it would be executing 15000 tons of tower materials which
were taken at low margins.
n In view of the competition and unfavourable payment terms, the company is
going slow on the EPC segment and is being selective in order bidding. This segment
is likely to post degrowth in the current fiscal. The order backlog in the
EPC segment is Rs 7.48 bn consisting of nine projects. The orders to be executed
include construction of transmission lines and substations.
n In the conductor segment, the company's order backlog stands at Rs 4.72 bn to
be executed over a period of 10 months. The company indicated that ordering
from PGCIL has picked up recently and there are plans to tender for 72000 tons
of tower materials.
n Total borrowings stand at Rs 4.6 bn comprising of Rs 2.8 bn of long term borrowing.
The average cost of borrowing is 13.1%.
n Current order backlog stands at Rs 17 bn vs Rs 14.5 bn. The management is optimistic
of clocking revenues of Rs 18-20 bn in the current fiscal.
Valuation and Recommendation
DPIL is trading at 4.3x and 4.4x FY12 and FY13 earnings respectively. We maintain
BUY on DPIL with a revised price target of Rs 179 (Rs 173 earlier).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DIAMOND POWER INFRASTRUCTURE LTD
PRICE: RS.117 RECOMMENDATION: BUY
TARGET PRICE: RS.179 FY13E P/E: 4.4X
q Numbers are ahead of our expectations mainly led by the cables division.
Order book is healthy at Rs 17 bn. For the current fiscal, we believe
cables would be the main growth driver as the EPC projects and transformer
divisions continue to remain subdued.
q The stock is trading at very attractive valuations. We maintain BUY with
a target price of Rs 179 (Rs 173 earlier).
q Concerns: Deteriorating financial health of SEBs remains a key concern
for the stock.
Robust growth in cables offsets weakness in conductor and EPC
divisions
Revenue for the quarter rose 30% yoy on account of strong growth in cables division.
Conductor segment revenues were down 5% yoy on partly on account of decline
in Aluminum prices. During the quarter, the company sold 7050 tons of conductors
vs 7200 tons in Q2 FY11. The realization at Rs 139333 per ton was marginally
lower due to yoy decline in aluminum prices during the quarter.
In the EPC segment revenues has been lower on subdued order backlog. The company
has been selective in taking fresh orders in the EPC segment as the pricing has
been unremunerative.
The cables segment posted robust growth aided by capacity addition and sustained
demand from the power and industrial sector. DPIL has raised its LT cables capacity
from 8800 kms to 33000 kms and HT cables capacity from 2800 kms to 5600 kms
in Q4 FY10. The company has been aggressively marketing its LV and MV cables in
the retail market.
Maintained margins at healthy level despite material price inflation
Despite the all-round commodity price inflation especially in copper and aluminum,
the company managed to preserve margins. The conductor segment reported
healthy margins on account of its focus on distribution conductors (thinner compared
to transmission conductors). Also, compared to larger peers who are mainly into
ACSR conductors, DPIL has a higher share of All Aluminum Alloy Conductor
("AAAC"). EBIT per ton in conductors declined to Rs 15300 per ton vs Rs 19694 per
ton.
Employee costs rose sharply during the quarter on account of addition of employees
for its expansion projects.
Sharp margin expansion in transformers division was surprising given that the sector
peers are reporting margin pressures. The management indicated that the profits
included variation claims pertaining to the previous quarters and segment margins
should revert back to the normal levels of 8-10%.
Other developments
n DPIL has commissioned Extra High Voltage Cables plant to manufacture 500 KV
cables. The plant has been supplied by Maillefer, France. Globally, there are only
seven manufacturers with capability to make upto 500 KV cables.
n The company has started trial production for the plant and expects to manufacture
33-66 KV cables and progressively move towards 220 KV and above EHV
cables.
n The company has completed type testing for the 66-220 KV voltage levels. It
now needs to complete the PQ test (Prequalification) which is to be conducted in
China and the duration of testing is 3 months. Accordingly, the testing for the
product sample would start from 20 Dec 2011 to 20 March 2012 period.
n Meanwhile since it has completed the type-testing of cables, it is eligible for bidding
for private sector orders. The company has already bid for 4 large orders,
which are expected to be finalized by February 2012.
n Pending the requisite approvals, the company plans to utilize its EHV cables plant
to manufacture medium-voltage cables. This would substantially enhance its MV
cables throughput.
n The company's transmission towers plant with a capacity of 48000 mtpa has
commenced commercial operations. The Company has an order backlog of Rs
1.1 bn aggregating 35000 MT to be supplied over the next 8 months.
n The management indicated that profitability in the tower segment could remain
weak in the Q3 as it would be executing 15000 tons of tower materials which
were taken at low margins.
n In view of the competition and unfavourable payment terms, the company is
going slow on the EPC segment and is being selective in order bidding. This segment
is likely to post degrowth in the current fiscal. The order backlog in the
EPC segment is Rs 7.48 bn consisting of nine projects. The orders to be executed
include construction of transmission lines and substations.
n In the conductor segment, the company's order backlog stands at Rs 4.72 bn to
be executed over a period of 10 months. The company indicated that ordering
from PGCIL has picked up recently and there are plans to tender for 72000 tons
of tower materials.
n Total borrowings stand at Rs 4.6 bn comprising of Rs 2.8 bn of long term borrowing.
The average cost of borrowing is 13.1%.
n Current order backlog stands at Rs 17 bn vs Rs 14.5 bn. The management is optimistic
of clocking revenues of Rs 18-20 bn in the current fiscal.
Valuation and Recommendation
DPIL is trading at 4.3x and 4.4x FY12 and FY13 earnings respectively. We maintain
BUY on DPIL with a revised price target of Rs 179 (Rs 173 earlier).
No comments:
Post a Comment