BGR Energy - Betting on future; company update; Hold ::Edelweiss (pdf link)

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BGR Energy (BGRL IN, INR 339, Hold)

We recently met the management of BGR Energy (BGR) to get latest business updates. We learnt that disqualification of Ansaldo-Caldaie by the Supreme Court (SC) paves way for NTPC to call for financial tender for its 11x660MW boiler bulk tender. Further, BGR expects to receive LoI for its 800MW turbines by March-April 2012. Post awarding of orders for bulk tenders, BoP orders worth INR60bn are expected to be floated by NTPC soon. BGR has already submitted bids worth INR220bn with order pipeline pegged at INR200bn. We maintain ‘HOLD’ with target price of INR 347.

SC judgment to speed up order award by NTPC

Supreme Court upheld technical disqualification of Ansaldo-Caldaie by NTPC for its 11x660MW boiler bulk tender. This paves way for NTPC to invite financial bids from the qualified three players in the fray - BHEL, L&T-MHI and BGR-Hitachi with competition expected to be intense. Further, BGR (being L1) expects to receive LoI for its 800MW tubines (4 sets) by March-April 2012. BoP orders are set to follow the bulk tender soon.

Order backlog robust; pipeline strong

BGR’s current order backlog stands at INR85bn. The company indicated that it has already bid for projects worth INR200bn even as the order pipeline remains strong at INR220bn. Rajasthan SEB’s order (worth INR60bn), which has been delayed due to environmental / coal issues, is likely to be awarded over the next few months as approvals fall in place.

           

Outlook and valuations: Cautious; maintain ‘HOLD’

While ordering scenario has improved, we await for meaningful traction before building in new orders in our estimates. On our consolidated EPS, BGR is trading at P/E of 10.5x and 9.9x FY12E and FY13E, respectively. We maintain ‘HOLD’ and upgrade the stock to ‘Sector Performer’ with revised target price of INR 347 (earlier INR 248).

BGR Energy - Betting on future; company update; Hold