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Result highlights
Q2FY2012 results, a mixed bag: Genus Power Infrastructure Ltd (GPIL)’s
Q2FY2012 results were in line with our expectation on the operating front.
However, a high interest cost driven by high working capital requirement spoiled
the overall profit after tax (PAT) picture. The receivables days rose sharply to
over 200 days led by a delay in receiving payments from the state electricity
boards (SEBs).
Top line growth in line with estimate: The net sales during the quarter rose by
9% and was in line with our expectation of Rs177.8 crore. The management
indicated that this growth was on account of a good growth in the meter segment
(which accounts for about 55% of revenue) while the project segment was
sluggish.
Margin under slight pressure: The operating profit margin (OPM) of 15.3% was
in line with our expectation of 15% but lower than the 16.9% margin reported in
Q2FY2011. The raw material cost was in line with the rise in the revenues.
However, sharp rise in the other expenses offset this positive impact. The
management indicated that GPIL would maintain a robust margin of about 15%
in the coming quarters on the back of a healthy growth in the sales of meters,
which have high margins.
PAT fell by 44% YoY: The interest cost increased sharply to Rs15.5 crore, which
included a foreign exchange (forex) loss of Rs6.14 crore. Consequently, the PAT
fell by 44% to Rs8.6 crore as against our expectation of Rs13.6 crore. The loans
increased to Rs340.5 crore, led by a delay in receiving payments from its key
clients, the SEBs. The SEBs are currently facing a financial crunch, which could
be eased by the hiking of tariffs. But due to the
impending elections and therefore political pressure,
most of the state utilities are reluctant to hike tariffs.
The SEBs form 80% of GPIL’s current debtors owing the
company Rs414.7 crore.
Order book at Rs605 crore: The current order book
of the company stands at Rs605 crore as against Rs602
crore at the end of Q1FY2012. This implies an order
inflow of Rs184 crore (up 50% year on year [YoY]) for
the quarter. The company has already participated in
tenders worth Rs2,500 crore. Nonetheless, the bookto-
bill ratio has fallen to 0.83x, indicating poor revenue
visibility.
Estimates downgraded: We have updated the annual
report details in our model and built in the higher
interest cost. Consequently, our estimates for FY2012
and FY2013 have been downgraded by 12% and 22%
respectively. We are expecting a negative compounded
annual growth rate (CAGR) of 1.4% in the bottom line
over FY2011-13. We would like to see good order
inflows and recovery in receivables in order to upgrade
our estimates for the company.
Price target revised to Rs18: GPIL, a mid-cap company
under our coverage, has a leadership position in the
Indian meter space with a growing presence in the
transmission and distribution space. However, in recent
times its order inflow and execution have been below
our expectation and its guidance. Further, the delay
in the receivable payments has added to its woes. On
these concerns, in recent times, the stock’s price has
seen a steep fall. At the current market price, the
valuation remains attractive at 3.9x FY2013E earning
per share (EPS) while it discounts its historical (FY2011)
book value by 0.5x. Hence we maintain our Buy
recommendation on the stock with a revised price
target of Rs18 (5.5x FY2013E EPS). Improved order
inflow, timely payment from its debtors and profitable
execution are the key positive triggers for the stock in
the near term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result highlights
Q2FY2012 results, a mixed bag: Genus Power Infrastructure Ltd (GPIL)’s
Q2FY2012 results were in line with our expectation on the operating front.
However, a high interest cost driven by high working capital requirement spoiled
the overall profit after tax (PAT) picture. The receivables days rose sharply to
over 200 days led by a delay in receiving payments from the state electricity
boards (SEBs).
Top line growth in line with estimate: The net sales during the quarter rose by
9% and was in line with our expectation of Rs177.8 crore. The management
indicated that this growth was on account of a good growth in the meter segment
(which accounts for about 55% of revenue) while the project segment was
sluggish.
Margin under slight pressure: The operating profit margin (OPM) of 15.3% was
in line with our expectation of 15% but lower than the 16.9% margin reported in
Q2FY2011. The raw material cost was in line with the rise in the revenues.
However, sharp rise in the other expenses offset this positive impact. The
management indicated that GPIL would maintain a robust margin of about 15%
in the coming quarters on the back of a healthy growth in the sales of meters,
which have high margins.
PAT fell by 44% YoY: The interest cost increased sharply to Rs15.5 crore, which
included a foreign exchange (forex) loss of Rs6.14 crore. Consequently, the PAT
fell by 44% to Rs8.6 crore as against our expectation of Rs13.6 crore. The loans
increased to Rs340.5 crore, led by a delay in receiving payments from its key
clients, the SEBs. The SEBs are currently facing a financial crunch, which could
be eased by the hiking of tariffs. But due to the
impending elections and therefore political pressure,
most of the state utilities are reluctant to hike tariffs.
The SEBs form 80% of GPIL’s current debtors owing the
company Rs414.7 crore.
Order book at Rs605 crore: The current order book
of the company stands at Rs605 crore as against Rs602
crore at the end of Q1FY2012. This implies an order
inflow of Rs184 crore (up 50% year on year [YoY]) for
the quarter. The company has already participated in
tenders worth Rs2,500 crore. Nonetheless, the bookto-
bill ratio has fallen to 0.83x, indicating poor revenue
visibility.
Estimates downgraded: We have updated the annual
report details in our model and built in the higher
interest cost. Consequently, our estimates for FY2012
and FY2013 have been downgraded by 12% and 22%
respectively. We are expecting a negative compounded
annual growth rate (CAGR) of 1.4% in the bottom line
over FY2011-13. We would like to see good order
inflows and recovery in receivables in order to upgrade
our estimates for the company.
Price target revised to Rs18: GPIL, a mid-cap company
under our coverage, has a leadership position in the
Indian meter space with a growing presence in the
transmission and distribution space. However, in recent
times its order inflow and execution have been below
our expectation and its guidance. Further, the delay
in the receivable payments has added to its woes. On
these concerns, in recent times, the stock’s price has
seen a steep fall. At the current market price, the
valuation remains attractive at 3.9x FY2013E earning
per share (EPS) while it discounts its historical (FY2011)
book value by 0.5x. Hence we maintain our Buy
recommendation on the stock with a revised price
target of Rs18 (5.5x FY2013E EPS). Improved order
inflow, timely payment from its debtors and profitable
execution are the key positive triggers for the stock in
the near term.
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