Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BGR ENERGY SYSTEMS
PRICE: RS.281 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.353 FY13E P/E: 8.0X
q Revenue declined during Q2FY12 by 32% YoY and was lower than our
estimates. Execution during the quarter was impacted by monsoons as
well as delays from clients regarding certain approvals
q Operating margins witnessed an improvement and stood at 14.2% due
to higher proportion of BOP project execution.
q Net profit performance was impacted by steep increase in interest outgo
and poor execution.
q BGR is currently trading at 7.7x and 8.0x P/E and 4.9x and 5.2xEV/EBITDA
on FY12 and FY13 estimates respectively. We roll forward our valuations
on FY13 at 10x FY13 estimated earnings and arrive at a revised price target
of Rs 353 (Rs 520 earlier).
q We downgrade the stock to ACCUMULATE from BUY earlier despite decent
upside from the current levels due to lower than expected numbers
seen during H1FY12, lack of visibility in terms of near term order inflows
from RRUVNL and NTPC as well as other private players. We had expected
improvement in the order inflows for company from Aug-Sep,
2011. Apart from NTPC turbine award, inflows for the company continue
to remain lackluster. This has resulted in lowering the revenue visibility
for FY13 and onwards. Corresponding increase in borrowings have
dented the overall profitability. Thus we believe that stock may continue
to underperform till the time order inflow ramps up significantly for the
sector.
Revenue growth impacted by monsoons and client related issues
n Revenue declined during Q2FY12 by 32% YoY and was lower than our estimates.
Execution during the quarter was impacted by monsoons as well as delays
from clients regarding certain approvals. Company expects to cover up the
short fall in the coming quarters.
n Current order book of company stands at Rs 72.7 bn providing revenue visibility
for next 1.5 years. Power segment continues to form a significant proportion of
the order book as well as revenues for the company.
n During Q2FY12, company emerged as the lowest bidder for 9X800MW bulk tender
for NTPC for turbines and generator. BGR energy would get 5X800MW while
BHEL would be given 4X800MW provided it matches the bid quoted by BGR
energy. This order adds nearly Rs 36 bn to the company's order book and also
enables the company to enter into super critical space.
n However, other project awards are taking longer than expected time. Order inflow
from NTPC bulk tender for super critical boilers for 11X660MW is still delayed.
NTPC had referred the matter to Supreme Court and till now no judgement
has come through. Project award from RRUVNL for 2X660 MWprojects in
Suratgarh and Chabbra is still awaiting environmental clearance. We believe that
if this project gets delayed further, there may be a possibility of re-tendering of
the project by Jan, 2012 after completion of one year of first tendering.
n Company is targeting Rs 45-50 bn order inflow during FY12 including NTPC order.
n Based on H1FY12 performance, we reduce our FY12 revenue estimates and also
introduce FY13 estimates. We believe that revenue growth for FY12 will be
largely driven by execution from Metturand Kalisindh EPC projects as well as
Chandrapur and Marwa BOP projects while in FY13, revenue growth would be
led by Chandrapur, Marwa and Krishnapatnam BOP projects, NTPC's turbine and
generator project and new order inflows. We thus expect revenue growth to remain
muted for FY12 and FY13.
n Key risk to our estimates would come from lower than expected order inflow
during H2FY12 and FY13 which would impact revenue growth in FY13 and going
forward.
Operating margins improved on a sequential basis
n Operating margins witnessed an improvement and stood at 14.2% due to higher
proportion of BOP project execution. Along with this, Chandrapur and Marwa
BOP projects also have price variation clause in place which protected the margins.
n We however expect margins to be 11% in the coming quarters due to higher
proportion of EPC project execution. However, during FY13, margins are likely to
improve since EPC projects would be nearing completion by end of FY12. We
thus expect margins to improve to 12% in FY13.
Net profit growth impacted by higher interest outgo and poor
execution
n Net profit performance was impacted by steep increase in interest outgo and
poor execution
n Overall borrowings for the company have witnessed an increase from Rs 13.36
bn at the end of FY11 to Rs 23 bn at the end of Sep, 2011. This increase is primarily
on account of increase in receivables primarily from Rajasthan and Tamil
Nadu projects and higher loans and advances.
n Company expects to reduce these borrowings by end of FY12 once it receives
the retention money related to Vijayawada project. Total retention money stands
at Rs 13 bn, out of which Rs 9 bn is for projects under execution and Rs 4 bn for
projects already completed. Company expected to receive Rs 1-1.2 bn by March,
2012 related to Vijayawada and APGENCO while remaining amount pertaining
to Kakatiya and Kapherkheda project is expected to be received by Q1FY13.
n We incorporate higher borrowings in our estimates and expect net profits to decline
by 19% in FY12 and decline by 3% for FY13.
Valuation and recommendation
n BGR is currently trading at 7.7x and 8.0x P/E and 4.9x and 5.0xEV/EBITDA on
FY12 and FY13 estimates respectively.
n We roll forward our valuations on FY13 at 10x FY13 estimated earnings and arrive
at a revised price target of Rs 353 (Rs 520 earlier)
n We downgrade the stock to ACCUMULATE from BUY earlier due to lower than
expected numbers seen during H1FY12, lack of visibility in terms of near term
order inflows from RRUVNL and NTPC as well as other private players. We had
expected improvement in the order inflows for company from Aug-Sep, 2011.
Apart from NTPC turbine award, inflows continue to remain lackluster. This has
resulted in lowering the revenue visibility for FY13 and onwards. Corresponding
increase in borrowings have dented the overall profitability. Thus we believe that
stock may continue to underperform till the time order inflow ramps up significantly
for the sector.
n We believe that higher than expected order inflows would result in re-rating of
the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
BGR ENERGY SYSTEMS
PRICE: RS.281 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.353 FY13E P/E: 8.0X
q Revenue declined during Q2FY12 by 32% YoY and was lower than our
estimates. Execution during the quarter was impacted by monsoons as
well as delays from clients regarding certain approvals
q Operating margins witnessed an improvement and stood at 14.2% due
to higher proportion of BOP project execution.
q Net profit performance was impacted by steep increase in interest outgo
and poor execution.
q BGR is currently trading at 7.7x and 8.0x P/E and 4.9x and 5.2xEV/EBITDA
on FY12 and FY13 estimates respectively. We roll forward our valuations
on FY13 at 10x FY13 estimated earnings and arrive at a revised price target
of Rs 353 (Rs 520 earlier).
q We downgrade the stock to ACCUMULATE from BUY earlier despite decent
upside from the current levels due to lower than expected numbers
seen during H1FY12, lack of visibility in terms of near term order inflows
from RRUVNL and NTPC as well as other private players. We had expected
improvement in the order inflows for company from Aug-Sep,
2011. Apart from NTPC turbine award, inflows for the company continue
to remain lackluster. This has resulted in lowering the revenue visibility
for FY13 and onwards. Corresponding increase in borrowings have
dented the overall profitability. Thus we believe that stock may continue
to underperform till the time order inflow ramps up significantly for the
sector.
Revenue growth impacted by monsoons and client related issues
n Revenue declined during Q2FY12 by 32% YoY and was lower than our estimates.
Execution during the quarter was impacted by monsoons as well as delays
from clients regarding certain approvals. Company expects to cover up the
short fall in the coming quarters.
n Current order book of company stands at Rs 72.7 bn providing revenue visibility
for next 1.5 years. Power segment continues to form a significant proportion of
the order book as well as revenues for the company.
n During Q2FY12, company emerged as the lowest bidder for 9X800MW bulk tender
for NTPC for turbines and generator. BGR energy would get 5X800MW while
BHEL would be given 4X800MW provided it matches the bid quoted by BGR
energy. This order adds nearly Rs 36 bn to the company's order book and also
enables the company to enter into super critical space.
n However, other project awards are taking longer than expected time. Order inflow
from NTPC bulk tender for super critical boilers for 11X660MW is still delayed.
NTPC had referred the matter to Supreme Court and till now no judgement
has come through. Project award from RRUVNL for 2X660 MWprojects in
Suratgarh and Chabbra is still awaiting environmental clearance. We believe that
if this project gets delayed further, there may be a possibility of re-tendering of
the project by Jan, 2012 after completion of one year of first tendering.
n Company is targeting Rs 45-50 bn order inflow during FY12 including NTPC order.
n Based on H1FY12 performance, we reduce our FY12 revenue estimates and also
introduce FY13 estimates. We believe that revenue growth for FY12 will be
largely driven by execution from Metturand Kalisindh EPC projects as well as
Chandrapur and Marwa BOP projects while in FY13, revenue growth would be
led by Chandrapur, Marwa and Krishnapatnam BOP projects, NTPC's turbine and
generator project and new order inflows. We thus expect revenue growth to remain
muted for FY12 and FY13.
n Key risk to our estimates would come from lower than expected order inflow
during H2FY12 and FY13 which would impact revenue growth in FY13 and going
forward.
Operating margins improved on a sequential basis
n Operating margins witnessed an improvement and stood at 14.2% due to higher
proportion of BOP project execution. Along with this, Chandrapur and Marwa
BOP projects also have price variation clause in place which protected the margins.
n We however expect margins to be 11% in the coming quarters due to higher
proportion of EPC project execution. However, during FY13, margins are likely to
improve since EPC projects would be nearing completion by end of FY12. We
thus expect margins to improve to 12% in FY13.
Net profit growth impacted by higher interest outgo and poor
execution
n Net profit performance was impacted by steep increase in interest outgo and
poor execution
n Overall borrowings for the company have witnessed an increase from Rs 13.36
bn at the end of FY11 to Rs 23 bn at the end of Sep, 2011. This increase is primarily
on account of increase in receivables primarily from Rajasthan and Tamil
Nadu projects and higher loans and advances.
n Company expects to reduce these borrowings by end of FY12 once it receives
the retention money related to Vijayawada project. Total retention money stands
at Rs 13 bn, out of which Rs 9 bn is for projects under execution and Rs 4 bn for
projects already completed. Company expected to receive Rs 1-1.2 bn by March,
2012 related to Vijayawada and APGENCO while remaining amount pertaining
to Kakatiya and Kapherkheda project is expected to be received by Q1FY13.
n We incorporate higher borrowings in our estimates and expect net profits to decline
by 19% in FY12 and decline by 3% for FY13.
Valuation and recommendation
n BGR is currently trading at 7.7x and 8.0x P/E and 4.9x and 5.0xEV/EBITDA on
FY12 and FY13 estimates respectively.
n We roll forward our valuations on FY13 at 10x FY13 estimated earnings and arrive
at a revised price target of Rs 353 (Rs 520 earlier)
n We downgrade the stock to ACCUMULATE from BUY earlier due to lower than
expected numbers seen during H1FY12, lack of visibility in terms of near term
order inflows from RRUVNL and NTPC as well as other private players. We had
expected improvement in the order inflows for company from Aug-Sep, 2011.
Apart from NTPC turbine award, inflows continue to remain lackluster. This has
resulted in lowering the revenue visibility for FY13 and onwards. Corresponding
increase in borrowings have dented the overall profitability. Thus we believe that
stock may continue to underperform till the time order inflow ramps up significantly
for the sector.
n We believe that higher than expected order inflows would result in re-rating of
the stock.
No comments:
Post a Comment