Transformers & Rectifiers Low margins orders impact performance : ::Emkay

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Transformers & Rectifiers

Low margins orders impact performance

BUY

CMP: Rs217                                        Target Price: Rs293

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n     TRIL’s Q2 performance (rev - Rs1.4bn, up 23% yoy, PAT - Rs21mn, down 79% yoy) is lower than est due to low margin orders (2Q EBITDA margins at 3.9% vs 15.1% yoy) execution.  

n     Has received Rs2.2bn, 765kv order (20 transformers) from PGCIL (will help in scaling up the range). Few orders including 765kv orders are low margin orders- to impact numbers in mid-term - cut FY12/13E EPS by 37% and 32%.

n     But we maintain that TRIL is quickly entering into big league of transformer mfrs (CG, ABB, Areva and Siemens) with a capacity to deliver across ranges - should lead to re-rating.

n     Some pain left on lower entry prices and ambiguity on sector fundamentals but TRIL better placed with exports and special transformers/rectifiers. Expect gradual re-rating; Retain Buy